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.
Market Trends and Analysis
With the holiday on Thursday, last week was a quiet week for the markets and a quiet week for lock volume. We had a total of 44 locks for $15.5M in three and a half market days. That’s only an average of 13 locks per day but was expected with the holiday. However, in general lock volume is up and June was a great lock month with 328 locks for $137M, which was up about 8% compared to May. Our trailing 4-week daily lock average has also ticked up to just shy of 20 per day!
The Freddie Mac average 30-year fixed rate is at 6.95% as of last Wednesday, up by 9 basis points from 6.86% the prior week. That puts the max APR this week for 30-year fixed rate loans at roughly 8.45% (6.95 + 1.50). The 10-year Treasury yield closed last week at 4.27%, down by about 12 basis points on the week, and is currently flat today at 4.27%.
“The combination of sustained easing of inflation and the looser job market is exactly what the Fed has been waiting for before beginning to cut rates. After last week’s data, the odds of a Fed rate cut coming in September have increased back to almost 75%.”
Even with the holiday-shortened week, there was a decent amount of economic data released last week. The main focus was on employment data with the June Nonfarm Payrolls report released on Friday. June saw an increase of 206,000 jobs which was slightly above the market expectation of 200,000, however, the previous two months were revised down by over 100,000 combined which brings the three-month average increase down to 176,000 per month. Also, the unemployment rate rose to 4.05% from 3.96% and has increased over 4% for the first time since the beginning of 2022. The labor market is showing signs of softening which the Fed has been waiting for. The combination of sustained easing of inflation and the looser job market is exactly what the Fed has been waiting for before beginning to cut rates. After last week’s data, the odds of a Fed rate cut coming in September have increased back to almost 75%. Overall market expectations had shifted to just one rate cut expected this year with the most likely scenario being a .25% rate cut at the November or December FOMC meeting. However, last week’s data has made it more likely that we may see multiple rate cuts this year.
Economic Indicators and Future Outlook
This week there is more fresh economic data being released with the most important releases being CPI on Thursday and PPI on Friday. The Fed and the market will be looking for continuing declines in the inflation numbers to further support the case for a rate cut in September. The Fed presidents and governors will be making the rounds with speaking engagements throughout the week as well. Investors will be looking for any changes in the overall tone and strategy of the Fed as they digest the week’s data.
Today MBS prices are generally flat compared to Friday’s close and the market is not moving much. The 10-year Treasury is flat compared to Friday’s close at 4.27%. Today is a quiet day for the market, but things will get busier this week as data is released and Fed speakers make their rounds.
Have a great week!
