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Market Analysis 12.17.25: Risk On The Day Is Low

Good morning on this best day of the week, Wednesday,

After some initial volatility in bonds yesterday when the BLS jobs data came out (which was dismal regardless of what the media writes), mortgage-backed securities settled down around 10am as most lenders were setting pricing and ended the day at about the same levels. Rates are likely to be about the same today as yesterday for most lenders and reprice risk on the day is low.

There’s nothing of merit on the economic calendar today, the only “event” is a 20-yr Treasury auction this afternoon at 1pm ET that will have no effect on bonds or rate sheets today. We’re not likely to see any big moves today, and although there is a lot of attention on tomorrow’s CPI inflation data which can and will always move markets.

Market analysis: from a higher view:

Mortgage Market & Rate Outlook — Wednesday, December 17, 2025

(Quiet on today’s data, very loud on tomorrow’s risk. Think “calm before CPI.”)

Quick snapshot of market analysis

  • Big picture: Markets are still digesting last week’s Fed rate cut and Monday’s soft-but-no-crash jobs data, while lining up for Thursday’s CPI and more delayed releases. Federal Reserve+1
  • Fed funds rate: Now 3.50–3.75% after the third 25 bp cut of 2025; the new “dot plot” shows only about 50 bps more cuts projected through 2027. Bondsavvy+3Federal Reserve+3Federal Reserve+3
  • Jobs / labor: November report showed +64k jobs and unemployment at 4.6%, the highest since 2021, but with clear warnings about shutdown-distorted data. Reuters+2Reuters+2
  • Retail / consumer: Newly released October retail sales were flat, with core categories positive; November looks steady but not booming based on early private data. The Economic Times+4Barron’s+4Census.gov+4
  • Bonds: 10-year Treasury ~4.15% today; the 2s/10s spread ~0.67%, a modestly steep curve for the first time in a while. Trading Economics+1
  • Mortgage rates (national averages):
  • 30-yr fixed purchase: ~6.3% today (Bankrate 6.33% APR; MND index ~6.27%). Bankrate+1
  • Freddie Mac weekly (as of 12/11): 6.22% on 30-yr, 5.54% on 15-yr. Freddie Mac

Baseline today: Rates are hovering near their better levels of 2025, with markets clearly in “don’t do anything dumb before CPI” mode.

1. What’s moving markets today

Data: the October retail catch-up, November still forming

Because of the 43-day government shutdown that ran through mid-November, some key data dropped late and out of order. Retail is the current example. Reuters+2Census.gov+2

  • October retail sales (released yesterday):
  • Headline: 0.0% m/m — flat overall.
  • Core categories (excluding autos & gas) were solidly positive, around +0.5% m/m, with strength in e-commerce and discretionary categories like sporting goods. Barron’s+2Census.gov+2
  • Year-over-year, sales were up roughly 3.5%, but higher prices and tariffs mean real (inflation-adjusted) spending is softer. Barron’s+1
  • Early November read (private data):
  • Retail analytics and trade groups are reporting ~1% revenue growth YoY with flat unit volumes — people are spending a little more dollars, but mostly because stuff costs more. Circana+1

Narrative for your crowd:

Consumers are pulling back at the edges, not slamming on the brakes. The holiday season looks “fine, not fantastic.”

That’s exactly the sort of “okay but slower” backdrop that supports gradual relief in rates rather than a sharp pivot.

Markets: oil, silver, and general “waiting for Godot (CPI edition)”

  • Global markets: Stocks are mixed. U.S. and global indices are wobbling as traders try to handicap tomorrow’s CPI and the next wave of delayed data. Reuters+2Barron’s+2
  • Oil: Up on headlines that the U.S. is tightening enforcement on Venezuelan oil shipments, which adds a little geopolitical risk premium back into energy. Reuters
  • Metals: Silver just broke above $65/oz for the first time ever; gold is nudging higher too, mostly on the “soft data + future Fed cuts + geopolitical noise” cocktail. Reuters

None of that directly sets mortgage rates, but it reinforces the broader setup: markets think growth is slowing, inflation is drifting lower, but risks are all over the place.

2. Fed & policy backdrop: divided doves

We’re only a week removed from the Dec 9–10 FOMC meeting, so Fed messaging is still the main macro anchor.

Key points:

  • The Fed cut the fed funds rate to 3.50–3.75%, its third 25 bp cut of 2025, citing softer labor and ongoing disinflation. Federal Reserve+1
  • The Summary of Economic Projections (the “dot plot”):
  • Median path has the funds rate only about 50 bps lower by end-2027, around 3.0–3.25%, so they’re sketching a long plateau, not a slide. Federal Reserve+2FRED Blog+2
  • Core inflation is projected around 2.5% in 2026, inching closer to target but not quite there. FRED Blog

The committee is anything but unified:

  • Governor Miran (voted for the cut) gave a speech this week arguing that shelter inflation is an “after-echo” of past rent spikes and should fall faster soon, thanks to very low increases in new-tenant rents. That’s a dovish data story. Federal Reserve
  • Atlanta Fed’s Bostic, not a voter this year, went the other direction, saying he expects no cuts at all in 2026 because the GOP tax bill and other forces may keep inflation above target until ~2028. That’s very hawkish guidance from a key voice. MarketWatch

So the signal you can share:

The Fed is easing, but it’s also worried about doing too much. Inside the building, you’ve got doves pointing at falling shelter inflation and hawks pointing at fiscal policy and sticky prices.

For mortgage rates, that usually means less drama from Fed meetings themselves, and more drama from each inflation and labor print.

3. Bonds & mortgage rates today

Treasuries & curve

  • 10-year Treasury yield: sitting around 4.15% today, roughly in the middle of the recent post-Fed range. Trading Economics+1
  • The 2s/10s spread (10-yr minus 2-yr) is about +0.67%, a modest positive slope after years of inversion. FRED

That “not-inverted” curve is consistent with:

  • Fed funds drifting lower into the mid-3s,
  • Inflation expectations easing but not crashing,
  • And investors still demanding a healthy premium to hold long-duration Treasuries and MBS.

Mortgage rates

Putting the main sources together:

  • Bankrate national 30-yr fixed APR (purchase): 6.33% today, Dec 17. Bankrate
  • Freddie Mac PMMS (weekly, as of 12/11):
  • 30-yr fixed: 6.22%
  • 15-yr fixed: 5.54% Freddie Mac
  • Mortgage News Daily index: latest read around 6.27% for a vanilla 30-yr fixed, down a couple of basis points over the last week. Mortgage News Daily

So your honest, client-ready framing:

“Nationally, 30-year fixed rates are bouncing around the low-6s, a good bit better than the >7% peaks we saw earlier this year, but still well above the ‘pandemic money’ years.”

4. Tomorrow’s CPI: why everyone’s holding their breath

Thursday, Dec 18 is the main event: November CPI finally hits the tape, with quirks:

  • The report is landing late because October data releases were pushed back by the fall government shutdown, and the statistical base is messy. Reuters+2Census.gov+2
  • The Cleveland Fed’s inflation nowcast has:
  • November CPI running around 0.3% m/m,
  • December a touch under that, keeping year-over-year inflation in the high-2s to ~3% zone. SSGA+2FRED+2

If CPI behaves:

  • Bonds will see more confirmation that inflation is grinding lower,
  • Markets will feel better about the Fed’s “slow easing” roadmap,
  • We likely get at least some support for current mortgage rate levels (or a bit better).

If CPI surprises higher:

  • Expect 10-yr yields to pop and MBS to widen,
  • Which would translate into noticeably higher rate sheets in a hurry, regardless of last week’s rate cut.

This is why trading desks are basically in “helmet and seatbelt” mode today.

5. How to talk about today’s market analysis with buyers, sellers & agents

Here are ready-to-use bullets you can drop into emails, social posts, or conversations:

For consumers:

  • “Mortgage rates are hovering in the low-6s, near some of the best levels we’ve seen this year, even though the Fed only cuts short-term rates directly.” Bankrate+2Freddie Mac+2
  • “The job market is cooling, not collapsing — unemployment has ticked up to about 4.6%, but most of that shift is happening slowly over months, not overnight.” Reuters+2Barron’s+2
  • “Retail sales and everyday spending are flat to slightly up, which tells us consumers are tightening belts but still out there — that’s a ‘soft landing’ story, not a crisis story.” Barron’s+2Circana+2

For agents & referral partners:

  • “We’re in a ‘structure matters’ market: low-6s rates plus seller credits and buydowns can recreate a much lower effective payment, even if the headline rate doesn’t start with a 5.”
  • “Data is distorted by the fall shutdown, so every major release (like CPI tomorrow) can move rates fast — having a lender who actually watches this stuff in real time is a real advantage.” Reuters+2Census.gov+2
  • “Inside the Fed, doves and hawks are publicly arguing about how much more easing is safe — that’s why markets are hyper-sensitive to each new data point instead of assuming a straight-line path down.” Federal Reserve+2MarketWatch+2

6. Lock vs. float stance — Wednesday 12/17

You’ll still customize to each file, but here’s a sensible bias matrix for today:

  • Closing in ≤ 2 weeks:
  • Clear lock bias.
  • We’re at relatively attractive levels; tomorrow’s CPI can easily push pricing ⅛–¼% higher in a single session if it disappoints. The upside from floating one more day is limited versus the downside risk.
  • 30–45 day closings:
  • Mild lock bias, especially for higher-DTI or marginal-qual deals.
  • For strong borrowers who can tolerate volatility, controlled floating is reasonable — but with a firm plan to lock quickly if CPI comes in hot.
  • 60–90+ days / new construction:
  • This is where product design beats crystal ball:
  • Extended locks with a float-down,
  • Permanent buydowns funded with seller credits,
  • Or carefully chosen ARM options for the right risk profile.
  • Given the Fed’s own dots and outside forecasts, the base case is “6-ish for a while, high-5s later”, not a rewinding to 3–4% money. Principal Asset Management+1

Market analysis bottom line today:

Rates are in a relatively friendly zone, the data is noisy, and tomorrow’s CPI is the main swing factor. Lock the wins you need, float only where the client’s risk tolerance and time horizon truly justify it.

Stay safe and make today great!