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
This week’s market update shows that mortgage rates continue to rise, with the average 30-year fixed rate now at 6.12%. Strong job growth and economic data have contributed to the increase in rates. As the Federal Reserve monitors inflation and other economic factors, future rate cuts are still uncertain. For borrowers, this means locking in rates sooner rather than later may be a good idea.
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 rise in rates has been fueled by a reset of market expectations, with most market participants shifting to a 25-basis point rate cut expectation at the next Fed meeting on November 7th.”
Market Trends and Analysis
The Freddie Mac Primary Mortgage Market Survey is issued on Thursdays, so even though last week’s reading was only up 4 basis points week over week, that does not include the big move higher in rates that we saw on Friday. The September Nonfarm Payrolls report showed 254k jobs created in September, which was significantly higher than the market expectation of 150k. In addition to the strong September numbers, prior months’ numbers were also revised higher. On top of the strong jobs data, Fed Chairman Powell, in a speech on Friday, remarked that given the fact that the U.S. economy remains robust, the FOMC will be very patient when considering further rate cuts at their next meeting in November.
Economic Indicators and Future Outlook
The rise in rates has been fueled by a reset of market expectations, with most market participants shifting to a 25-basis point rate cut expectation at the next Fed meeting on November 7th. That meeting comes two days after the election and shortly after the October jobs report on November 1st. There is still a good amount of time and data releases ahead of that, though. This week will bring the latest round of inflation data with CPI on Thursday and PPI on Friday. The Fed will be looking for a continued downward trend in the inflation data. Also, this week, the Fed presidents and governors will be making their rounds with plenty of speaking engagements throughout the week.
So far today, MBS prices are down again by about .25 in a continuation of last week’s selloff, and the 10-year Treasury is up sharply again today at 4.03%, rising above 4.0% for the first time in about two months.
We’ll continue tracking the market for any changes—be sure to check in next week for the latest insights!
