Mortgage rates fall after weak services sector report

“Data-driven” is one of the most common phrases you hear from the Federal Reserve these days when it comes to interest-rate policy. And while the Fed doesn’t directly dictate mortgage rates, the bond market tends to trade on the same data the Fed cares about.

Today’s key report, the ISM Services Index, isn’t at the top of the Fed’s list, but it’s long been a market driver when it comes to bonds and, therefore, interest rates. Today’s installment was much weaker than expected. Weak data correlates with lower interest rates, all else being equal.

Bonds improved immediately after the announcement. That allowed mortgage lenders to set lower rates today. Some lenders had already posted their initial rates for the day, and several ultimately issued positive price adjustments before the end of the day.

The bond market will be closed tomorrow for a holiday, but it will return on Friday morning for an even more important economic report: the jobs report.