How Mortgage Rates Really Move.

Inflation is the #1 enemy of bond investors. If they're earning 4% on a Treasury but prices are rising 5% per year, they're losing money in real terms. So when inflation prints hot, they sell bonds and demand higher yields to compensate.

The market reacts to the surprise, not the headline. If economists forecasted 3.1% CPI and it prints at 3.4%, that's a hot surprise. Mortgage rates typically move 5 to 15 basis points within an hour of the release.

The 10-year Treasury is the safest 10-year bet in the world. Every other long-term safe investment competes with it for capital, which means mortgage rates move in near lock-step with the 10-year yield.

The formula realtors should memorize: Mortgage Rate ≈ 10-Yr Treasury Yield + 1.5% to 2.0% spread. When the 10-year jumps 0.10% before noon, your buyer's rate has already moved with it. Locking decisions should respond to this, not to last week's headlines.

Three numbers from the jobs report move bonds: jobs added (vs forecast), the unemployment rate, and wage growth. Strong jobs signal a hot economy, which signals future inflation, which sends bond investors selling. Rates climb.

Weak jobs flip everything. Slowing hiring, rising unemployment, or stalling wages tell investors the economy is cooling. They rush into bonds for safety (the "flight to quality" trade), driving prices up and yields down. Rates drop.

The Fed sets one rate: the federal funds rate (overnight bank-to-bank lending). They do not set mortgage rates directly. Mortgage rates respond to the bond market, which has usually already priced in the Fed's move weeks in advance.

What actually moves rates at a Fed meeting isn't the decision. It's Powell's tone during the press conference. Words like "patient," "data-dependent," or "we see more work to do" shift bond traders' expectations for the next 6 to 12 months. That's where the action is.