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Market Analysis 10.24.25: Incremental Improvement

Good Friday AM from your Hometown Lender,

Market Analysis: Rates this morning are a little better.

Slow incremental improvement is fine by me. I like that much more than knee jerk reactions which often have equal and opposite reaction shortly thereafter.

Reprice risk on the day is low, the CPI inflation data was the big event for the day (and the week) and other than consumer sentiment data coming out at 10am ET there is nothing of note happening today.

The CPI data this morning came in a bit softer than expected, although still a tick higher than in August. The headline inflation came in at 3.0% versus the 3.1% expected and the 2.9% we saw in August. Core, which removes “volatile” food and energy prices, rose 3.0% as well, versus the expected 3.1%. This helps us because inflation is the enemy of longer-term bond yields like mortgage backed securities, and a softer reading means less concern.

However, after a knee jerk improvement, bonds settled back down and are only up a few basis points on the day.

From a higher view:

Market Analysis: What moved rates today (10/24)

  • Mortgage rates (weekly): Freddie Mac’s survey printed a new 2025 low — 30-yr avg 6.19% (as of Thu 10/23). That’s the third straight weekly decline and reflects softer Treasury yields. Remember: PMMS lags; your live sheets still track the 10-year and MBS. Freddie Mac+1
  • Treasury anchor: The 10-year is hovering near ~4.01% today — up a hair from yesterday but still under the psychological 4%–ish neighborhood we’ve been flirting with all week. That keeps retail mortgage pricing in a tighter, friendlier range (with headline whipsaws). YCharts+1
  • Oil & inflation vibe: After a sharp sanctions-driven spike, crude eased a bit today but remains on track for a ~7% weekly gain. Higher oil can lean inflation expectations up; today’s dip took some pressure off bonds but didn’t erase the weekly move. Reuters+2Reuters+2
  • Consumers: U. Michigan sentiment for October is roughly unchanged at 55 — consistent with “cautious but coping,” not a demand surge. ISR SCA+1
  • Politics (shutdown): The federal shutdown has reached Day 24 with the Senate adjourned until Monday; proposals to pay some workers failed yesterday. Shutdowns add a small growth drag (a mild tailwind for bonds) but the bigger market driver lately has been oil. CBS News+2The Washington Post+2

Where retail mortgage rates sit (context for borrowers)

  • Weekly average ≈ 6.19% (PMMS, 10/23). Daily lender sheets will flex with the 10-year/MBS; UMBS 5.5% has chopped in the ~101-06 to 101-11 zone this week — supportive, but headline-sensitive. Freddie Mac+1

The rest of this week & what’s next (date-stamped)

  • Today (Fri 10/24): U. Michigan sentiment (final) — steady. Markets also watching oil after sanctions headlines. Investing.com+1
  • Tue–Wed (10/28–10/29): FOMC meeting. Street expects a 25 bp cut (odds very high), but the statement/presser and balance-sheet language will drive the real move. Kiplinger+1
  • Thu (10/30): Q3 GDP (advance) — referendum on the soft-landing narrative. Kiplinger
  • Fri (10/31): PCE (Sep) — the Fed’s preferred inflation gauge; key for rate-cut path into year-end. Kiplinger

How to explain today to a novice client

  • Mortgage rates ≈ 10-yr Treasury + MBS spreads. When growth looks softer or inflation pressure cools, investors buy bonds → yields fall → mortgage pricing can improve. That’s the story behind this month’s PMMS downtrend. Freddie Mac
  • But oil is a wild card. A sustained move higher in crude can lift inflation expectations and nudge yields up, even if the economy is cooling — hence today’s “two steps forward, one back.” Reuters

Market Analysis: Near-term rate scenarios (next 1–3 weeks)

  1. Base case — Sideways/soft bias: Oil stabilizes, sentiment steady, shutdown lingers; 10-yr ~3.85%–4.05%, retail 30-yr fixed flat to slightly better. (Anchored by PMMS trend + sub-4% 10-yr.) Freddie Mac+1
  2. Data/Fed surprise hot: Strong GDP or sticky PCE, or the Fed guides less dovish → 10-yr 4.10%–4.30%, rate sheets worsen modestly. Kiplinger
  3. Risk-off jolt: Weak data or shutdown drama escalates → 10-yr 3.70%–3.85%, pricing improves, but with higher intraday volatility around month-end and the Fed. Kiplinger

Market Analysis: Practical lock/float playbook

  • Points vs. no-points: In a mostly sideways tape, point breakevens often matter more than small headline-rate changes. Price both coupons and document the breakeven for clients.
  • Closing ≤30 days: Keep a light lock bias — you’re trading small potential gains for insulation from FOMC + GDP + PCE + oil headlines.
  • 45–90 days out: Float with guardrails. Pre-set triggers (e.g., lock on a decisive 10-yr break above ~4.10% or if UMBS 5.5% slides below recent support ~101-05/06). Trading Economics+1

Stay safe, enjoy the weekend & first, make today great!