Thursday brought the much-anticipated policy announcement from the European Central Bank (ECB). While our focus remains on mortgage rates in an entirely different continent, major goings on in European markets almost always have an effect on the equivalent U.S. markets. When it comes to rates, the market of choice is bonds. ECB officials unveiled a new bond-buying program that will add demand for certain European bonds. All other things being equal, excess demand for bonds results in lower rates. Lower rates in Europe spill over to lower rates in the U.S. The above is a bit of an oversimplification, but an accurate one. There are actually simple reasons for lower rates today as well! Domestic economic data was quite weak, with one key business barometer (the Philly Fed Index) resulting in a chart that looks like this (lower lines = weaker economy): In other words, the Philly Fed Index is pointing to the biggest economic weakness since the initial covid lockdowns and the 6-month outlook is saying something even worse. Weak economic data is one of the oldest and best friends of low interest rates. A weaker economy helps ease demand side inflation pressure (inflation is a key enemy of low rates). It also prompts investors to seek safer havens–investments that won’t lose a lot of money if the economy continues to contract–and the bond market is the quintessential safe haven.