Good Friday morning from your Hometown Lender. Here is your market analysis for Friday.
Yesterday bonds were volatile through the day, starting out with big losses before clawing back to flat on the day as most lenders set pricing, then choppy through the day but ending at about the same level as the day ended with quite a few reprices better near the end of the day.
Rates just got crushed this morning.
Bonds are selling off, and it’s brutal. Reprice risk is high on the day, it has gone from bad to worse to “oh the hell with it, I’m going home”… all before 8am.
Market Analysis – From a higher and better view:
Market Analysis – Quick Snapshot
- This morning’s inflation surprise was producer-side, not consumer-side: February PPI rose 0.7% month over month and 3.4% year over year. Core final-demand PPI excluding food, energy, and trade services rose 0.5% on the month and 3.5% on the year.
- Last week’s CPI was firmer than ideal but still calmer than today’s PPI: headline CPI +0.3% m/m and +2.4% y/y, core CPI +0.2% m/m and +2.5% y/y. Shelter rose 0.2%, and rent rose 0.1%, the smallest monthly rent increase since January 2021.
- The labor market is softer than the Fed would prefer for this inflation backdrop: February payrolls fell 92,000, unemployment held at 4.4%, and average hourly earnings were up 3.8% y/y.
- Markets are trading the word stagflation without always saying it out loud: Brent crude was around $107.95, the 10-year Treasury yield was about 4.226%, the dollar was higher, and stocks were lower ahead of the Fed decision.
- Mortgage rates are still living in the low-6s, but the bond market woke up and chose violence: Freddie Mac’s weekly 30-year fixed averaged 6.11% last week, while Mortgage News Daily’s daily index showed 6.29% today.
- The broader economy is mixed, not broken: industrial production rose 0.2% in February, the January trade deficit narrowed to $54.5 billion, and the latest available retail sales report showed January down 0.2% m/m. February retail sales are still delayed on the Census calendar after the federal funding lapse.
1) Market Analysis – What Hit This Morning
Today’s fresh macro punch was PPI, and it was hot. The top-line number came in at +0.7% m/m, more than double the +0.3% economists expected in Reuters polling. Services rose 0.5%, goods rose 1.1%, and the cleaner core-style measure excluding food, energy, and trade services rose 0.5% and is now up 3.5% y/y. That matters because PPI is part of the pipeline that can bleed into future consumer inflation and PCE.
The latest CPI still says consumer inflation has not re-accelerated everywhere. February headline CPI was +0.3% m/m and +2.4% y/y. Core CPI was +0.2% m/m and +2.5% y/y. Shelter remained the biggest monthly driver, but shelter and rent both cooled, which is one of the few genuinely encouraging details in the report.
Narrative you can use: consumer inflation is not screaming higher, but pipeline inflation is warming back up, especially with oil already elevated. That gives the Fed less room to sound friendly this afternoon.
2) Fed Watch
The Fed’s statement and updated projections are due at 2:00 p.m. EDT, with Powell’s press conference at 2:30 p.m. EDT. The current target range is still 3.50% to 3.75%, where it was left in January.
The market expects no rate change today. The real story is whether the Fed’s language, dot plot, and projections shift more hawkish or at least more “two-sided.” Reuters reports policymakers may want to preserve optionality for hikes even if a hike is not the base case this week. Just as important, broader market pricing has moved from at least 50 bps of cuts priced by December earlier this year to barely a quarter-point of easing now.
3) Market Analysis – Where Mortgage Rates Actually Are
Freddie Mac’s last weekly survey showed the 30-year fixed at 6.11% and the 15-year fixed at 5.50%, both higher week over week. Mortgage News Daily’s daily reading had the 30-year fixed at 6.29% today. The 10-year Treasury was around 4.226%, which helps explain why the easy downward glide path in mortgage pricing has gotten a lot bumpier.
Practical translation: for client conversations, the message is “still low-6s, but very headline-sensitive.” The weekly Freddie survey is backward-looking by design; the daily read is the better pulse check for today’s lock conversation.
4) Housing Market Check
Housing is giving us the same answer it’s been giving for months: demand wakes up quickly when rates ease, but supply and affordability still keep the ceiling low. Pending home sales rose 1.8% in February to 72.1, which was better than expected and shows buyers are still there when financing relief appears. But Reuters also notes that rebound happened before the latest oil-and-yield move.
Builder sentiment improved by one point in March to 38, but that is still below the 50 breakeven line for a 23rd straight month. Builders are still dealing with land, labor, and cost pressure, and nearly two-thirds are still using incentives.
Latest available construction data were for January: permits 1.376 million, starts 1.487 million, completions 1.527 million. Single-family starts were 935,000 and single-family permits were 873,000. In plain English: supply is improving in spots, but the single-family affordability crunch is not fixed.
5) Market Analysis – Political Backdrop & Fed Independence
The political noise is not subtle. Reuters reports President Trump again pressed Powell to cut rates, and also notes Kevin Warsh is slated as the next Fed chair. Markets earlier in the year worried about Fed independence, but right now traders are reacting more directly to oil, inflation, and the softer jobs backdrop than to Washington theater.
That said, politics still matters because the Fed now has to navigate a weaker labor market, elevated inflation, and White House pressure all at once. If today’s statement sounds more symmetrical about the next move in rates, markets will read that as a meaningful shift.
6) Market Analysis – What This All Means for Rates Going Forward
Here is the clean read:
Base case: the Fed holds today, acknowledges a more difficult inflation-growth mix, and keeps markets from getting too optimistic about cuts. That likely means mortgage rates stay volatile around current levels instead of making a clean move lower. This is my inference based on hot PPI, elevated oil, and higher Treasury yields.
Better case: if oil cools, shelter disinflation continues, and the Fed leans on the soft payroll picture more than the PPI shock, Treasuries could retrace and mortgage rates could revisit the lower end of the low-6s. That’s possible, but it is not what the market is paying for this morning.
Worse case: if crude stays above $100 and March inflation data absorb more of the energy shock, markets will keep pushing cuts farther out and mortgage rates likely drift higher again. Reuters notes oil has already surged sharply and the market has materially repriced the Fed path.
Also worth noting: the growth picture is not collapsing. Industrial production rose 0.2%, the trade deficit narrowed sharply, and retail sales are soft but currently stale because the February report is still delayed. So this is not a clean recession trade; it is a messy inflation-versus-growth trade.
7)Market Analysis – Practical Takeaways
For buyers, waiting on the Fed is not a payment strategy. If the client is close on qualification, structure matters more than hope right now. The be
tter play is still seller credits, strategic buydowns, and making sure the financing plan matches the time horizon. That view lines up with a market where pending demand improves on lower rates, but fresh inflation shocks can reverse the move fast.
For refinances, there is still opportunity for borrowers carrying much higher paper from the worst parts of 2023 and 2024, but this is not a “just wait another week and it gets magically better” setup.
For agents, February’s pending sales rebound is your reminder that demand is rate-sensitive, not dead. When financing improves even a little, buyers reappear quickly.
8) Lock vs Float
My bias today is modestly lock-leaning until the Fed statement and Powell presser are behind us. That is especially true for closings inside 15 to 30 days, tight DTIs, or borrowers who do not have room for payment creep.
A controlled float can still make sense on longer escrows with strong buffers, but this is not the kind of tape where you float casually and then act surprised when oil headlines throw a chair through the rate sheet. uffers, but this is not the kind of tape where you float casually and then act surprised when oil headlines throw a chair through the rate sheet.
Stay safe and make today great!