You are currently viewing Market Analysis 11.3.25: Rates A Tad Worse

Market Analysis 11.3.25: Rates A Tad Worse

Good Monday morning from your Hometown Lender,

Rates are a tad (highly technical term) worse today.

The bigger weakness is in the Treasury yields which are sliding. The 10yr is at 4.12% today. It is still in the same trading channel so no worries there. With the lack of data (government shutdown day 34), markets cling to anything that comes across the tape. Today, Google/Alphabet filed for a corporate bond issuance of 15B. Corporate bonds take some of the money away from Treasuries as they pay a higher return so there are less buyers for the moment in Treasuries pushing yields slightly higher. I am not worried.

The ISM report was released today and it was weak.

It is the same narrative of a slowing economy and slowing employment picture. I think the Fed will likely need to cut in December. The three scenarios are 1) The government is back open and the data is released and surprisingly strong. No cut. 2) The government is back open and the data is released and comes in weak as expected, the Fed cuts 3) The government is not back open, markets are severely impacted and the drag on GDP and employment is extensive, the Fed cuts. This is employment week again. We will not get the government report which is always the biggest market mover of the month, but we will get the ADP report on Wednesday. Expect an outsized reaction to that.

Market Analysis from a higher view:

1. Big picture: where rates are today

10-year Treasury:

  • Trading around 4.10–4.12% today, up slightly from ~4.08% at Friday’s close. The Wall Street Journal+3YCharts+3MarketWatch+3
  • That’s still below the highs we saw earlier this year and roughly in line with levels that have supported low-6% mortgage rates.

Mortgage rates (national averages):

Day-to-day lender sheets will float a bit, but “low-6s for well-qualified borrowers” is an honest talking point right now.

Borrower-friendly translation:

“We’re not back to 3%, but we are at the best levels in over a year, and that’s a meaningful payment drop compared to this summer.”

2. Today’s key market analysis: manufacturing shows a slow grind

ISM Manufacturing – October (released today):

  • Headline PMI: 48.7, down from 49.1 in September (anything below 50 = contraction).
  • This is the 8th straight month of manufacturing contraction.
  • ISM notes that as long as the index stays above 42.3, the overall economy typically still grows — so this is “weak, not recession” territory. Reuters+1

What’s dragging it down:

  • New orders, production, and employment are all soft.
  • Tariffs and supply-chain issues are raising costs and stretching delivery times.
  • The report explicitly calls out higher input costs and longer supplier delivery times tied to tariffs. Reuters

For rates, weaker manufacturing = bond-friendly (supports lower yields) as long as inflation doesn’t flare.

3. Growth and inflation market analysis

Growth: still decent on paper

So despite soft manufacturing, the model says the economy overall is still growing solidly — helped by consumer spending and AI/tech investment.

Inflation: slowly drifting toward 3%

  • Core PCE (YoY) — the Fed’s preferred underlying inflation gauge — is about 2.9–2.9%+ year-over-year as of the latest data (August), basically hovering just under 3%. Investing.com+1
  • The Dallas Fed says its trimmed-mean PCE update for Oct 31 couldn’t be published because some underlying data are missing due to the shutdown. dallasfed.org

That combo — growth okay, inflation just under 3% — is exactly why the Fed has felt comfortable cutting but is not slamming the gas pedal.

4. The Fed: what they just did and why it matters for mortgages

At the Oct 29 meeting, the Fed:

  • Cut the fed funds rate by 0.25% (second cut in a row) to support a cooling labor market and patchy data.
  • Announced it will stop shrinking its balance sheet (ending QT) in December and gradually shift away from mortgage-backed securities over time.
  • Emphasized that future cuts (like December) are not guaranteed — they’re data-dependent, especially on jobs and inflation. Kiplinger

Key soundbite you can use:

“The Fed is telling us: we’re more worried about protecting jobs than squeezing the last half-percent out of inflation — but we’re not on autopilot.”

For mortgages:

  • Fed cuts don’t set 30-year rates directly, but they shape expectations for growth and inflation.
  • Those expectations drive Treasury yields and MBS pricing, which drive lender rate sheets.
  • A cautious-but-cutting Fed is one reason the 10-year is hanging near ~4.1% instead of breaking higher. Kiplinger+3YCharts+3MarketWatch+3

5. Consumer mood: nervous, not panicked

Two major confidence gauges for October:

  • Conference Board Consumer Confidence Index:
    • Down to 94.6 from 95.6 in September — six-month low.
    • Expectations index fell to 71.5, below the 80 line that often signals recession risk down the road. PBS+4AP News+4Reuters+4
  • University of Michigan Consumer Sentiment (final Oct):

Themes:

  • Households are tired of prices being high, even though inflation isn’t accelerating.
  • Lower-income households are feeling the squeeze more than higher-income ones. Reuters+1

For rates, softer sentiment supports the “slower growth / lower yields” story.

6. Mortgage-specific market analysis: signs of a thaw

Freddie Mac PMMS (week of Oct 30):

MBA Mortgage Applications (week ending Oct 24):

  • Total apps up 7.1% week-over-week after weeks of decline. MBA+2Trading Economics+2
  • MBA’s “Mortgage Application Payments” index for September shows the median payment actually fell a bit, confirming that lower rates have started to ease payment pressure. MBA

Narrative you can share:

“Applications jumped as soon as rates printed a 6-handle again. People who tuned out at 7% are cautiously checking payments and pre-approvals now.”

We don’t have fresh existing-home-sales data yet this week, but the broader pattern lately has been:

  • Slightly better inventory,
  • Homes taking a bit longer to sell,
  • Prices still up modestly year-over-year in most national aggregates — not crashing.

7. Political backdrop: shutdown + tariffs in the mix

Government shutdown — Day 34

  • The federal government has been partially shut down for 34 days over a funding fight between Congress and the Trump administration.
  • Senate leaders say there might be a path to a deal this week, but as of today the Senate is not yet voting on the House funding bill. cbsnews.com
  • Key pressure points now:
    • SNAP (food stamps) funding drama, with courts ordering contingency funds to be used for November benefits.
    • Rising ACA marketplace premiums becoming a political weapon for both sides as open enrollment begins.
    • Growing warnings about airport delays and other service disruptions. cbsnews.com

Why this market analysis matters for rates:

  • Shutdown = growth drag (less federal spending, more uncertainty) → generally helps Treasuries and keeps yields lower.
  • Shutdown also = data gaps (some agencies can’t release stats) → markets rely more on partial info and “nowcasts,” which increases volatility. cbsnews.com+3Reuters+3Kiplinger+3

Tariffs and manufacturing:

  • Today’s ISM report explicitly mentions tariffs as a factor in longer delivery times and higher input costs for factories. Reuters
  • Tariffs are doing two things at once:
    • Slowing parts of manufacturing (growth negative, bond-friendly), and
    • Keeping certain price pressures alive (inflation-supportive, bond-unfriendly).

For now, markets seem more focused on the slowdown side of that tug-of-war.

8. What this week looks like (11/3 and the days ahead)

This week’s U.S. calendar still has some key releases:

  • Today (Mon 11/3):
  • Later this week (per calendar):
    • Trade balance (Sept)
    • Factory orders (Sept)
    • JOLTS job openings (Sept) MarketWatch

These will feed the “are we gliding down or dropping off?” narrative. Biggest rate risk near-term is still any surprise on growth + inflation, not one-off headlines.

9. Near-term rate outlook (next 2–4 weeks)

Think in scenarios:

Scenario 1 – Soft landing / sideways (base case)

  • ISM stays sub-50, confidence stays soft.
  • Shutdown ends or at least doesn’t get dramatically worse.
  • Inflation data hold near ~3% core PCE.
    → 10-yr hangs around 3.9–4.15%,
    → 30-yr fixed mostly in the low-6s, with occasional marketing of “5.875% with points” type offers. Freddie Mac+4YCharts+4MarketWatch+4

Scenario 2 – “Still hot” surprise

  • Strong trade/Factory Orders/JOLTS prints.
  • Inflation nowcasts creep higher; any energy or tariff shock flares up. Cleveland Fed+1
    → 10-yr drifts toward 4.25–4.35%,
    → Lenders worsen pricing a couple of eighths.

Scenario 3 – Growth scare / shutdown shock

  • Shutdown drags on, SNAP/air-travel fallout gets ugly.
  • Confidence and forward-looking data (JOLTS, etc.) weaken further. sca.isr.umich.edu+3cbsnews.com+3Reuters+3
    → Flight to safety pushes 10-yr below ~3.9%,
    → You see better rate sheets — but intraday reprices come quickly and can vanish just as fast.

Right now, markets are priced closest to Scenario 1 with a nervous eye on Scenario 3.

10. Market Analysis Explainer:

“Mortgage rates are currently in the low 6s, the best we’ve seen in over a year. That’s happening because the Fed has started cutting rates, manufacturing is slowing, and consumers are more cautious — all of which tend to help long-term interest rates.

At the same time, inflation is still just under 3%, and Washington is stuck in a government shutdown, which makes the data noisy and keeps markets jumpy. So this is a good opportunity to capture an improved rate, but we still need a plan in case headlines push things around.”

Lock/float framing:

Focus on payment and breakeven, not rate bragging. A move from, say, high-6s/7s into low-6s with minimal cost can make sense even if “5s” aren’t back yet.

Closing in ≤30 days:

Lean lock, especially if today’s pricing works for the deal and DTI is tight.

45–90 days out:

“Let’s float, but with rules: if the 10-yr pops clearly above ~4.2% or lender costs worsen by ~0.25%, we lock immediately.”

Refi conversations:

  • Focus on payment and breakeven, not rate bragging. A move from, say, high-6s/7s into low-6s with minimal cost can make sense even if “5s” aren’t back yet.

Stay safe and make today great!