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
Interest rates for mortgages and bonds are rising, with the 30-year fixed mortgage rate currently at 6.32% and the 10-year Treasury yield at 4.09%. Despite expectations for some rate cuts by the Federal Reserve later this year, market volatility will continue to affect rates, and economic data will play a key role in shaping future trends.
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.
Overall, in the long run, we are in a downward rate cycle and we should still expect more rate cuts through next year. The Fed and market participants are highly dependent on economic data, and as the data is released, the market will react accordingly.
Lock Volume Update
Last week saw below-average lock volume with 79 new locks totaling $37M, averaging 16 locks per day. Our 4-week daily lock average is now 18 per day. Freddie Mac’s average 30-year fixed rate stands at 6.32%, up 20 basis points from the prior week, with the maximum APR this week for 30-year fixed loans roughly at 7.82%.
The 10-year Treasury yield closed last week at 4.09%, up by 11 basis points.
Rising Rates and Market Sentiment
Rates have continued to rise since the September Nonfarm Payrolls report two Fridays ago, increasing by about 25-30 basis points. Last week, focus shifted to inflation data. The CPI report on Thursday came in slightly above expectations, while the PPI report on Friday came in slightly below expectations, but bond markets saw no relief. The rise in rates is due to a re-set of market expectations. Currently, there’s a 20% chance the Fed won’t cut rates at their November meeting, but the most likely scenario is a 0.25% cut in both November and December. Up until last week, there was an expectation of a 0.50% cut in November.
Looking Ahead
Mortgage rates do not move in a straight line; market volatility will persist. However, the overall trend points to a downward rate cycle, with more cuts expected next year. The Fed and market participants will continue to rely on economic data to inform their decisions. This week, the key data release will be U.S. Retail Sales on Thursday. There’s still a lot of time and data between now and the next Fed meeting, but a 0.25% rate cut is the most likely outcome.
We’ll continue tracking the market for any changes—be sure to check in next week for the latest insights!