Insights and Analysis: Mortgage and Real Estate Capital Markets Update with Jeff Rosato, SVP of Capital Markets at Nationwide Mortgage Bankers.
Key Takeaways
Mortgage rates have dipped below 6% for the first time in over two and a half years, with the Freddie Mac 30-year fixed at 5.98% and the 10-Year Treasury yield easing to 3.96%. Inflation remains slightly above expectations, as PCE and PPI data show persistent pressures, while the labor market continues to hold strong. Geopolitical tensions in the Middle East are influencing energy markets, equities, and Treasury yields, adding uncertainty for investors. Fed futures currently price in about a 50% chance of a 0.25% rate cut at the June meeting, with total cuts around 0.625% expected by year-end. Market participants will closely watch labor and inflation reports, along with geopolitical risks, to assess impacts on mortgage rates and broader capital markets.
Here is this week’s update on the major bond market indices, scheduled Federal Reserve activity, upcoming market-moving economic data releases, and broader bond market trends.
“Mortgage rates had hovered around 6.10% for most of the year but dropped closer to 6% about two weeks ago. By the end of last week, they fell below 6% for the first time since September 2022 — about two and a half years ago. “
Market Overview and Rate Trends
The Freddie Mac average 30-year fixed rate stood at 5.98% as of last Thursday, down three basis points compared to the prior week. That puts the maximum APR this week for 30-year fixed-rate loans at roughly 7.48% (5.98 + 1.50).
The 10-Year Treasury yield closed last week at 3.96%, down sharply by 12 basis points for the week. Mortgage rates breaking below 6% opens limited refinancing opportunities for borrowers currently in the mid-6% range; however, at least half of all existing mortgages are at or below 4.5%, so broad refinance activity remains constrained.
Last week’s economic calendar was light. The Producer Price Index (PPI) inflation report came in slightly higher than expectations, following the prior week’s PCE inflation index, which was also above expectations. This reinforces that inflation remains persistent and above the Fed’s 2% target.
Federal Reserve and Policy Outlook
Fed futures markets show little chance of a rate cut in March or April. Currently, there is approximately a 50% probability of a 0.25% cut at the June meeting, with markets pricing in roughly 0.625% in total cuts by year-end.
Monetary policy remains data-dependent, and investors will be closely watching upcoming labor market and inflation reports for further guidance.
Geopolitical Developments
This weekend, the U.S. and Israel launched operations against Iran, resulting in significant leadership casualties. Markets are reacting with spikes in oil and gold prices, declining equities, and increases in Treasury yields and mortgage rates. Notably, the typical “flight to quality” trade has not materialized; the 10-Year Treasury is up sharply by eight basis points since Friday’s close.
This week’s focus will remain on military developments in the Middle East and potential disruptions in energy markets, along with labor market data including the February ADP employment report on Wednesday and the official February U.S. Employment report on Friday. Several Federal Reserve member speaking engagements are also scheduled throughout the week.
Economic Data and What to Watch
MBS prices are down approximately 20–30 basis points compared to Friday’s close, while the 10-Year Treasury yield is up eight basis points to 4.04%.
Investors will continue monitoring employment data, inflation readings, and geopolitical developments to assess potential impacts on mortgage rates and broader market conditions.
Looking Ahead
Markets remain sensitive to new economic data and geopolitical developments. Staying informed and agile will be key as mortgage rates and bond market trends continue to respond to both domestic and international events.
Wishing everyone a week of insight, growth, and market-savvy decisions.
