Insights and Analysis: Mortgage and Real Estate Capital Markets Update with Jeff Rosato, SVP of Capital Markets at Nationwide Mortgage Bankers
I hope everyone enjoyed the weekend! Here’s this week’s update on the major bond market indices, scheduled Federal Reserve meetings, upcoming market-moving economic data releases, and general bond market trends.
Market Trends and Analysis
Earlier this month, mortgage rates plunged and have since lingered just under 6.5%. Although rates have stabilized, softer economic data and declining inflation suggest a gentle downward trend through the end of the year. Despite the recent decline in rates from around 7.25% to the mid-6.0s, there hasn’t been a significant rise in mortgage applications. A string of weaker economic data, particularly poor employment figures and positive inflation trends, has shifted market expectations toward a potential Fed rate cut in September.
“Although mortgage rates have stayed relatively flat over the past couple of weeks, softer economic data and declining inflation suggest rates will continue to gently slope downward through the end of the year.”
Last week, all eyes were on Fed Chairman Jerome Powell’s speech at the Jackson Hole Symposium. He confirmed that the time has come for the Fed’s policy to adjust but emphasized that the timing and pace of rate cuts will continue to depend on incoming economic data. Additionally, the minutes from the July Federal Open Market Committee (FOMC) meeting revealed that several members were ready to begin transitioning to a less restrictive monetary policy in September. While there’s still a significant amount of data to be released ahead of the next meeting that could influence the Fed’s decision, the consensus is leaning towards a rate cut in September. The market is currently pricing in a total of 100-125 basis points of cuts for the year, spread over the next three FOMC meetings. However, whether the September cut will be 25 or 50 basis points remains uncertain, though a 50 basis point cut is becoming more likely.
Economic Indicators and Future Outlook
This week’s economic calendar is packed with important data releases, including the Q2 GDP revision and personal income and spending reports. The most potentially market-moving release will be the PCE Inflation Index on Friday. Additionally, there are numerous Fed speaking engagements scheduled throughout the week. As of today, MBS prices have remained generally flat compared to Friday’s close, and the 10-year Treasury is down a few basis points at 3.79%.
Have a fantastic week ahead!
