John’s Finance Corner
A Bumpy Ride for Bonds and Mortgage Rates
Treasury Bonds and Mortgage Rates experienced some turbulence last week as several key economic data points were released. Let’s dive into the details:
Federal Reserve Meeting Insights
Last week, the Federal Reserve held its latest meeting and opted to keep the Fed Fund Rate unchanged, sitting at 4.25% to 4.5%. The Fed Fund Rate, used for interbank lending, influences various interest rates across the economy. While it doesn’t directly set mortgage rates, changes in the Fed Fund Rate can influence bond traders, which indirectly impacts mortgage rates.
Some aspects of the meeting brought relief for bonds and rates:
- GDP growth projections for the year decreased from 2.1% to 1.7%.
- The unemployment rate is projected to rise slightly from 4.3% to 4.4%.
However, the Fed also announced they expect Core PCE inflation to increase from 2.5% to 2.8%, which was unwelcome news for mortgage rates. A survey of Fed members revealed that they anticipate two Fed Fund Rate cuts later this year, which could provide some relief down the road.
Strong February Home Sales
Last week also brought surprising news in the housing market. Existing home sales exceeded expectations, rising 4.2% in February after forecasts had anticipated a 3% decline. This growth is particularly notable given that most buyers for February data were shopping in December and January when mortgage rates were higher than they are today.
NAR Chief Economist Lawrence Yun attributed this uptick to an increase in inventory, which has brought some buyers back into the market. However, inventory levels remain low compared to pre-pandemic standards. With ongoing supply shortages and strong buyer demand, home prices are likely to continue appreciating throughout the year.
Looking Ahead: PCE Report in Focus
This week, we’re bracing for another bumpy ride as the Fed’s favorite inflation measure, the Personal Consumption Expenditures (PCE) report, is set to release on Friday. While recent CPI and PPI reports have been favorable, key indices from these reports feed into PCE calculations. Based on the available data, the upcoming PCE report could show less positive results.
If PCE indicates higher inflation, we may see Treasury yields increase, potentially pushing mortgage rates a bit higher. As always, it’s a crucial week to monitor economic developments and their impact on the bond market.
If you’re considering a move in the mortgage market—whether it’s buying, refinancing, or simply exploring your options—feel free to reach out. I’m here to help guide you through the latest trends and make the most informed decisions for your financial goals.
John Lamberg
MORTGAGE LOAN ORIGINATOR
NMLS 189233
