Fed Speeches Drive Markets

It was another incredibly volatile week as investors attempted to determine the impact of last week's Fed announcement on mortgage rates. Early in the week, mortgage rates continued to move higher, but soothing comments from Fed officials caused mortgage rates to reverse direction. After all the daily swings, mortgage rates ended the week a little lower.

A number of Fed officials made speeches, and the common theme was that investors overreacted to last Wednesday's Fed statement. Fed officials were surprised by the magnitude of the increase in yields on Treasuries and mortgage-backed securities (MBS), and the resulting increase in mortgage rates, as demanded by investors. Their comments were effective. MBS prices improved and mortgage rates reversed some of the recent increase.

Based on the results of their weekly survey, Freddie Mac reported that mortgage rates rose last week and did so by a record amount. As mentioned above, rates actually moved lower. The difference comes from the timing of the Freddie Mac survey. Freddie Mac collects its data early each week. The increase they reported last week is really comparing mortgage rates pre-Fed meeting to post-Fed meeting. When MBS prices and mortgage rates are as volatile as they have been recently, the Freddie Mac survey results can be misleading.