Early Signs Of November Volatility But Next Week Could Be Worse

Rates surged sharply at the beginning of the week, leaving market observers puzzled. Some analysts attributed the rise to election odds, while others believed it was linked to trader positioning ahead of significant events in the weeks to come. Regardless, mortgage rates increased by over an eighth of a percent on Monday—a rare occurrence without a clear trigger.

After reaching their highest levels in months on Wednesday, there has been a slight recovery in the latter half of the week. Hopefully, this indicates that rates are stable while awaiting the next significant catalyst.

Why "hopefully?" Because there's no guarantee that the future will follow the trends suggested by the current market. So, what do we know? A few key points stand out.

We know that rates have risen significantly over the past four weeks, more than mainstream media reports indicate. While weekly surveys show an increase of about 0.40%, the actual rise in daily average rates has exceeded 0.70%.

We also know that next week’s jobs report, set for Friday, is a significant potential source of volatility, for better or worse. Following that, the election in the subsequent week could have an even greater impact. Adding to this, the Fed's next rate announcement just a few days later creates a clear setup for volatility. As always, keep in mind that this volatility can swing both ways depending on the outcomes of these key events.

Here are some highlights from this week’s economic and housing data:

The most notable reaction in the bond market this week was in response to the weekly jobless claims data. Initially, yields rose because claims were lower than expected. However, traders also noted that "continuing claims" (those still filing for unemployment beyond the first week) reached their highest level in years.

Existing home sales fell short of expectations and have generally remained at their lowest levels since the Great Financial Crisis over a decade ago.

Weekly mortgage application data has been making headlines lately due to a surge in September as rates decreased. However, the refinancing index has quickly returned to those lower levels as rates have surged in October.

While the chart above may appear dramatic, the changes in refinance applications are occurring on a micro scale compared to previous refinancing waves.