Insights and Analysis: Mortgage and Real Estate Capital Markets Update with Jeff Rosato, SVP of Capital Markets at Nationwide Mortgage Bankers.
Key Takeaways: Bond Market Trends and Fed Outlook
Mortgage rates have been gradually decreasing for the past five weeks but remain high at around 7% as the market waits for signals from the Federal Reserve. This week’s key focus is the PCE Index, the Fed’s preferred inflation measure, which could impact rates depending on the results.
Here is 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.
“…the most anticipated data release will be the PCE Index on Friday. This is the Fed’s preferred gauge of inflation and has the potential to really move the bond markets if it comes in higher or lower than expectations.”
Market Overview
The Freddie Mac average 30-year fixed rate currently sits at 6.85%, marking a slight decline of 2 basis points from the previous week. Rates have been on a downward trend for five consecutive weeks, albeit by only 20 basis points overall. The 10-Year Treasury yield closed last week at 4.40%, down 6 basis points from the previous week.
Mortgage-backed securities (MBS) and Treasuries have been trading within a tight range, offering some stability in an otherwise volatile market. However, many in the mortgage industry are hoping for a more significant decline in rates.
Federal Reserve & Economic Outlook
Expectations for rate cuts have shifted significantly over the past few months due to persistent inflation and a stronger-than-expected labor market. Fed Funds futures now predict only one rate cut in the second half of 2025. The latest FOMC meeting minutes, released last Wednesday, echoed Chairman Powell’s recent statements, reinforcing the Fed’s cautious stance on rate cuts. Powell has made it clear that rate cuts are unlikely before mid-year, and if inflation accelerates, a rate hike is still on the table.
Additionally, uncertainty surrounding trade policy—particularly Trump’s proposed tariffs—has further complicated the economic outlook. While mortgage rates have stabilized around 7%, the Fed’s “wait and see” approach could keep them within this tight range for some time. However, any unexpected shifts in inflation or economic weakness could quickly alter the Fed’s stance.
Upcoming Economic Data Releases
This week is packed with key economic reports, including several housing-related indicators:
• Tuesday: Case-Shiller Home Price Index, Consumer Confidence
• Wednesday: New Home Sales
• Thursday: Pending Home Sales, Q4 GDP Revision
• Friday: Personal Income & Spending, PCE Index
The PCE Index on Friday is the most anticipated release, as it is the Fed’s preferred inflation gauge. If it deviates significantly from expectations, it could lead to market volatility and impact bond yields.
In addition to economic data, the new administration’s fiscal policies, particularly Trump’s proposed tariffs, are under scrutiny. The Fed will be closely monitoring how these policies may affect inflation and consumer prices. Several FOMC members are scheduled to speak this week, and their comments will provide insight into whether the latest economic data has influenced the Fed’s outlook.
Market Conditions
MBS prices are flat compared to Friday’s close, and the 10-Year Treasury yield is down slightly by 2 basis points to 4.40%. While markets are quiet at the moment, this week’s economic data releases could bring increased volatility.
Check back next week for market updates, as economic data and Fed insights may lead to shifts in rates and trends.
