The holiday-shortened week began yesterday with a substantial decline in average mortgage rates.  Caveats abound, however.  They include things like the bond market making up for an extra day of trading due to the bank holiday, the flare up of the Israel-Gaza conflict, and a marked shift in tone from several Federal Reserve speakers.  All of that arrived against the backdrop of a rate trend that was desperately looking to justify a correction.

Bonds improved again today, but not as sharply as yesterday.  The average mortgage lender improved by only a small amount for top tier 30yr fixed scenarios. Depending on the lender, many borrowers may not see much of a change, but several lenders released improvements in the afternoon.

Any improvement is notable as it happened despite an unexpected uptick in wholesale inflation as seen in the Producer Price Index (PPI) this morning.  Inflation is the key reason for high rates, so when it's higher than expected, rates are more likely to move higher.  The fact that this didn't happen this morning can mean markets are more focused on geopolitical risks, the evolution of Fed policy, and more relevant data in the days ahead.

Specifically, PPI is easily the lesser of the two when compared to tomorrow's Consumer Price Index (CPI).  If CPI is much higher or lower than expected, we're more likely to see rates react in a logical way.