This is Matt Graham with the MBS Live Market Update. Last week was very slow in terms of scheduled economic data and to some extent market moving events. There were several announcements on tariffs, several letters sent out that increased tariff mounts on key trading partners, and while that caused some volatility, mainly in stocks, the bond market tends to view that as more of a double-edged sword whereby. Tariffs can be a hit to economic growth, but also can increase inflation risk, thus canceling each other out. And that was the case. If we examine the nitty gritty impacts of those headlines on the bond market, and that is really not. Two worthwhile considering things were largely sideways after Tuesday and Tuesday’s. High yields were achieved largely in response to the previous week’s economic data, specifically Thursday’s jobs report. That set in motion a bit of a correction to the strong rally that we had heading into the end of June. Took 10 year yields up from just over 4.2 to just over 4.4, and that is where we ended the week. Now, in the new week, we are pushing into just slightly higher yields. It’s not abundantly clear that is super significant. Yet we will know a lot more about how the present week is shaping up after tomorrow’s CPI. That’s the consumer price index, the first of the major national inflation reports. The first real opportunity to see any potential impacts on inflation from tariffs. This is important because several Fed members have said that they would expect it to show up in the June data, which is what tomorrow is. So, if it doesn’t, then the market will likely breathe a fairly big sigh of relief regarding tariff driven inflation, and that would most likely result in rates moving lower. Probably exploring the range that was set into the jobs report with 10-year yields between 4.2 and 4.4. If, however, tariff driven inflation does show up in a meaningful way, there could be some additional weakness for the bond market to endure. And we definitely have a recent precedent with 10 year yields up above 4.6 as recently as May 22nd. I’m not saying that yields would immediately shoot that high, but that’s only about 15 bips higher than we are right now, and we could easily see a move of 10 bips or more tomorrow if CPI comes in substantially, above or below forecast. In addition, there are other inflation related reports. This week on Wednesday, we get the wholesale version of CPI, and that is PPI, the producer Price Index. Also, industrial production. The Fed’s beige book with us as always. MBA’s refi numbers which have ticked up recently amid falling rates but are probably at some risk of a little bit of a bounce considering last week’s rising rates. And then import-export prices. Retail sales, Philly Fed business inventories and home builder confidence on Thursday Last but not least, Friday gives us housing starts and consumer sentiment. That laundry list aside, it’s important to remember that the focus is on the biggest ticket, employment data and inflation data. That would be the jobs report that we won’t get again until the beginning of next month and tomorrow’s CPI. That’s all for now. Back to you.
Matt Graham, Founder and CEO, MBS Live
Matt began as an originator in 2002. He fell in love with the idea of following MBS in real-time but felt that existing products were only scratching the surface. Thus was born MBS Live in 2007, the first-of-its-kind platform with real-time market data/analysis, and live chat with analysts, traders, and originators around the country. He is currently the Founder and CEO of MBSLive!
He’s been covering bond/mortgage markets, writing commentary, alerts, and chatting with the live community every business hour of every business day ever since.
Matt also serves as the Chief of Operations for mortgagenewsdaily.com, where he is one of the industry’s most respected mortgage rate experts, frequently quoted in the media. Mortgage News Daily’s rate index is used as the definitive resource on day-to-day mortgage rate averages.
He lives in the Pacific Northwest with his wife and son where he enjoys skiing, fishing, coaching youth sports, playing the guitar, and more DIY projects/hobbies than he’d care to admit.