Mortgage Rates Today, Oct. 28, 2024: This Week's Contest Is Trump Trades vs. Economic Data

In brief

Last Friday, The New York Times ran a story under the headline, "U.S. Bond Market Braces for the ‘Trump Trade’ of Large Tariffs and Deficits." These relate to the chances of former President Donald Trump winning next week's presidential election.

It quoted David Cervantes, the founder of Pinebrook Capital, an asset management firm. "Trump wins, you short bonds," he said. In other words, he suggested that bond prices would fall and yields would rise if Mr. Trump takes the Oval Office.

Unfortunately, mortgage rates are largely determined by the yield on mortgage-backed securities, a type of bond. So rising yields mean higher rates.

The Times explained that both candidates' policies will likely increase the deficit though Vice President Kamala Harris might increase it by half as much as her rival.

"But," said The Times, "It is Mr. Trump’s proposals — including steep tariffs and extra-large tax cuts — that investors have become focused on, especially as his odds of winning have risen in some betting markets." That's because many economists fear Mr. Trump's plans for steep tariff rises could fuel higher inflation.

So, we believe Trump trades were behind the mortgage rate rises we saw during the first half of last week. And, we're concerned that they could continue — on and off, depending on movements in polls and betting markets — until next Tuesday's election.

After that, a win by Ms. Harris could see a fall in those rates as investors rewind old Trump trades. But they might rise sharply if Mr. Trump is victor.

The question today is whether this week's economic data, some of which is usually highly consequential for mortgage rates, will prove more influential than Trump trades. Or will those trades' momentum swamp the reports?

We can't even begin to guess. But, on Saturday, MarketWatch reported that "Wall Street is going all-in on election betting markets."

Coming up

This week

Markets are currently focused on employment data. At least, they are when they're not fretting about the presidential election.

And this week brings a plethora of employment-related reports, starting tomorrow and culminating in Friday's official jobs report, aka the employment situation report.

Unusually, jobs week also brings a couple of other heavyweight reports. On Wednesday, we're due the first estimate of gross domestic product (GDP) during the third quarter of this year (Q3/24).

And Thursday's calendar features the Federal Reserve's favorite gauge of inflation, the personal consumption expenditures (PCE) price index. Only a few months ago, markets were obsessed with inflation data. Now, such numbers are much less important as investors assume price rises have been pretty much reined in.

We'll brief you more fully on each major report the day before it's due.

Strap in for next week, which promises to be exceptionally volatile. Not only might we get a good idea of the likely outcome of the presidential race in the days following Nov. 5, but the Fed should also unveil its latest cut (if any) to general interest rates next Thursday.

Mortgage rates today

There are no economic reports scheduled for publication today. So, any movements in mortgage rates today will be down to Trump trades and other news that affects the economy.

Such news could include developments in the warlike dispute between Israel and Iran.

Tomorrow

There are three economic reports on tomorrow's calendar. But the S&P Case-Shiller home price index rarely touches mortgage rates.

The other two are also unlikely to have much effect on those rates. But they might nudge them a bit either way. So, here's what markets are expecting from them, according to MarketWatch:

• September job openings and labor turnover survey (JOLTS) — Markets expect a small fall in the number of job openings that month, to 7.9 million from 8 million in August
• October consumer confidence — Markets expect a slight improvement to 99.2 from 98.7 in September

Market expectations are key here. If tomorrow's actual numbers are higher than expected, mortgage rates might rise. If they're lower, those rates might fall.

Further ahead

Over the weekend, the Mortgage Bankers Association (MBA) published its October Mortgage Finance Forecast. And its expectations were much more downbeat than they have been recently. This may be another symptom of the Trump trade.

The MBA thinks rates for 30-year, fixed-rate mortgages will average 6.3% this year and 5.9% in both 2025 and 2026. It then expects that average to inch back up to 6.0% in 2027. That's really a very modest drop over such a long period.

Of course, many variables were in play for the MBA's modeling, including, very importantly, the presidential election. So, its forecasts are highly speculative and may well change again.

But it reinforces yet again our long-term message: If you're waiting for significantly lower mortgage rates before making your move in the housing market, you could be hanging around for several years.