When the market priced economic weakness earlier in 2024, it brought the 10-year yield down towards 3.80%, but it didn't break that level, raising questions about whether it could drop further to the 'Gandalf line' at 3.37%.
Despite the 10-year yield reaching highs of 4.70% due to strong economic data and hotter inflation, mortgage rates haven't closely followed this year as spreads have improved. However, the softening labor market might still push rates lower.
Mortgage spreads, which were a concern in 2023 due to banking crises, have improved in 2024. Incorporating 2023's worst spread levels would push current mortgage rates 0.49% higher, indicating room for further decrease.
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