Market Wrap-Up: Mortgage Rates Higher This Week ????

This week, financial markets experienced a relatively calm period regarding scheduled data and volatility. However, several speeches from Federal Reserve officials provided clarity on the future of interest rates. The general expectation of multiple rate cuts in 2024 has now shifted to anticipating just one cut.

Key Highlights ??

Fed Funds Rate Expectations:

• The chart below illustrates market expectations for the Fed Funds rate at the end of the year. The current rate is 5.375%, and the market now foresees only a 0.25% cut by December.
• Earlier this year, the market anticipated more significant cuts, but that optimism has diminished.

July Rate Cut Unlikely:

• Initially, a rate cut in July seemed likely, but that has changed. The spike in April followed the Consumer Price Index (CPI) report.
• Fed speeches reinforced the sentiment that rate cuts are unlikely in the near term.

Notable Fed Comments ???

• Jefferson: The increase in market rents during the pandemic may keep housing services inflation elevated for some time.
• Barr: The Fed needs to allow tight policy more time to work; Q1 inflation was disappointing.
• Bostic: Inflation still has a long way to go before reaching the target.
• Daly: Confidence in inflation sustainably dropping to 2% is not yet achieved.
• Mester: Progress on inflation stalled in the first quarter; rate cuts are not appropriate at this time.
• Waller: Several more months of good inflation data are needed before considering easing policy.

Data-Driven Decisions ??

The Fed's approach remains "data-dependent." This week, key events included:

• S&P Global's Service Sector Index: Unexpectedly spiked to the highest level in a year, indicating significant cost pressures.
• 10-Year Treasury Yields: Rose from 4.43% to almost 4.50%, marking a crucial resistance level.

Mortgage Rates: What to Expect ??

Despite relatively stable economic reports, mortgage rates climbed higher this week, driven by the following:

• Freddie Mac vs. Mortgage News Daily (MND): Freddie's weekly survey showed a delay in reflecting actual rate movements. MND's daily rate average offers a more accurate day-to-day picture.

Looking Ahead ??

Next week, keep an eye on the following events that could influence the bond market:

• Friday's PCE Price Index: This inflation measure, comparable to the CPI, will be crucial in determining future rate movements.

Conclusion ??

In summary, while this week didn't bring significant changes, the trend indicates that mortgage rates are inching higher. As always, it's essential to stay informed and prepared for potential shifts in the market.

For more insights and personalized advice on navigating the mortgage landscape, feel free to reach out. Together, we can find the best solutions for your financial goals. ????