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 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 Fed is expected to hold interest rates steady this week, but signal to markets to expect a rate cut at the next decision meeting on September 18.”
The Fed’s meeting this week will start on Tuesday and finish Wednesday with the latest interest rate decision at 2:00, followed by Chairman Powell’s press conference at 2:30. Rates are expected to remain unchanged at this meeting, however, policy guidance and commentary post-meeting could provide more clues to the Fed’s approach and potential rate cut in September. Last week the latest Q2 GDP report showed that economic growth remained strong, although there were signs of slowing momentum in the data. The PCE index released on Friday was the last inflation data point released prior to the Fed’s meeting this week, and it showed that inflation is continuing to cool and is trending in the right direction. Despite the uptick in growth during Q2, there are signs of stress throughout the economy, which might be enough for the Fed to begin to cut the fed funds rate in September in order to achieve their desired soft landing. The Fed is expected to hold interest rates steady this week, but signal to markets to expect a rate cut at the next decision meeting on September 18. However, last week’s solid GDP report helped reiterate that the Fed sees no urgency for an immediate rate cut.
Economic Indicators and Future Outlook
This week gets off to a slow start with no economic data released today, but there will be plenty of potential market-moving releases later this week. We’ll see the Case-Shiller home price index released tomorrow, which is expected to show home price appreciation continuing to remain strong. Then there is a lot of employment data starting with the ADP report on Wednesday and the official U.S. July employment report on Friday. The labor market has been the backbone of the Fed’s strategy, and weakness in jobs data could build momentum for rate cuts as the Fed reviews the latest round of economic data. With the employment data and the Fed announcement this week, there is potential for some big market-moving days.
So far today, MBS prices are generally flat compared to Friday’s close and the market is not moving much. The 10-year Treasury is down a few basis points compared to Friday’s close at 4.17%. Today is a quiet day for the market, but things will get busier this week as data is released and the Fed makes their statement.
Have a great week!
