Two-month bond rally hits bottom

Mortgage market commentary

The two-month-long bond rally has hit bottom. It’s been fun: From a peak at 5.24 percent, the 10-year T-note made it to 4.73 percent yesterday, which has taken mortgages from just below 7 percent to just below 6.5 percent.

This morning’s news that August payrolls had grown by 128,000 jobs was the rally killer — the economy is slowing, not crashing. Bonds are way ahead of a chance for Fed easing; in the presence of current inflation numbers it cannot ease unless it sees a real threat to economic growth.

We might get some inflation relief from a decline in oil prices.