Good Thursday AM from your Hometown Lender. Here’s today’s market analysis.

Yesterday saw mortgage bonds with some early gains, helping rate sheets recover a bit further and signaling that the worst may be behind us (at least for now). Both the 10yr yield and mortgage bonds ended the day at about the same levels as when pricing came out, after a calm day.

Bonds started today day off with some small gains, but started losing ground around 8:30am when wholesale inflation came in hotter than expected and oil price increases rekindle fears about inflation ahead of the Fed meeting today. If bonds don’t recover or continue selling, rate sheets will be slightly worse than yesterday.

Volatility risk on the day is high, even though I think it is unlikely the Fed meeting or Fed Chair Powell’s press conference will cause any big moves.

That is doubly true with this morning’s inflation reading. Although markets had seemed to have found a bit of a lull to start the week, this morning is seeing that slip away. Oil is up to $108 a barrel this morning, and the specter of volatility remains in the shadows.

Market Analysis – From a higher and better view:

Market Analysis – Quick Snapshot

The big number this morning was February PPI, which came in hotter than expected at +0.7% month over month versus +0.3% expected, with headline PPI at +3.4% year over year. Reuters also reported that economists still estimate core PCE rose +0.4% in February, which would make it three straight months at that pace.
The 10-year Treasury is sitting around 4.18% to 4.23%, depending on the moment you catch it, which tells you bonds are still dealing with sticky inflation and headline risk.
Mortgage rates are still elevated: the latest Mortgage News Daily daily survey had top-tier 30-year fixed pricing at 6.29% on March 17, while Freddie Mac’s weekly survey showed the average 30-year fixed at 6.11% as of March 12.
The Fed is widely expected to hold the policy rate at 3.50%–3.75% today, with the statement due at 2:00 p.m. ET and Powell at 2:30 p.m. ET.
Oil is the wild card. Reuters reported Brent around $108.32 and WTI around $97.98, which is not exactly the kind of “helpful” inflation data bond markets were hoping for.

1) Market Analysis – What Hit This Morning

Today was a PPI morning, not a CPI morning, and it did not give the market much comfort. Headline producer prices rose 0.7% in February, the biggest monthly increase in seven months, and the annual rate climbed to 3.4%. Services did a lot of the lifting, and Reuters noted the report also points to another firm core PCE reading when that delayed report arrives next month.

Last week’s core CPI was still running at 2.5% year over year, which was better behaved, but today’s PPI says the “all clear” on inflation is still not here. In plain English: consumer inflation looked manageable, producer inflation did not, and the Fed cares about both—especially when oil is joining the party uninvited.

Narrative you can use:

“Today’s inflation data came in hotter than expected on the wholesale side, so the market is reading this as another reminder that the Fed is not in a rush to cut and mortgage rates may stay choppy for a while.”

2) Fed Watch

The market overwhelmingly expects no move today from the Fed. The real focus is the statement, the dot plot, and Powell’s tone. Reuters reports investors have scaled back cut expectations materially, with markets now leaning toward just one cut this year, and some analysts are even watching for language that could make the next move look less one-way and more “cut or hike depending on what inflation does.”

That does not mean a hike is the base case. It means the Fed may want to keep optionality alive because inflation is still above target, oil has surged, and growth data is getting shakier. That is a very uncomfortable mix—basically the economic version of driving with one foot on the brake and one on a banana peel.

3) Where Mortgage Rates Actually Are

Mortgage rates are not waiting on the Fed to sprinkle magic dust. The latest daily MND reading showed 6.29% for top-tier 30-year fixed rates, and Freddie Mac showed a 6.11% weekly average. Mortgage News Daily also made the important point plainly: even if the Fed surprised, the Fed does not directly set mortgage rates.

What matters more for mortgage pricing right now is the combination of a 10-year near 4.2%, sticky inflation data, wider caution in bond markets, and the oil shock feeding “higher for longer” thinking. That means rate improvement can still happen, but it probably comes through calmer inflation and better bond market behavior, not from a single Fed headline.

4) Market Analysis – Housing Market Check

Housing gave us one mildly encouraging datapoint yesterday: pending home sales rose 1.8% in February to 72.1, beating expectations for a decline. Gains were strongest in the West, South, and Midwest, though contracts were still down 0.8% from a year earlier.

The bigger housing backdrop is still one of slow price appreciation and affordability pressure. A Reuters poll published March 17 said analysts now expect U.S. home prices to rise just 1.8% in 2026 and 2.5% in 2027, with 30-year mortgage rates hanging around 6% and supply still structurally tight.

5) Political Backdrop & Fed Independence

Politically, the pressure on the Fed is still there. Reuters reports President Trump has continued pressing Powell to cut rates and has nominated Kevin Warsh to succeed him when Powell’s term ends in mid-May, though hurdles remain. Markets are watching to see whether the Fed stays firmly independent in tone and keeps policy centered on inflation and employment rather than public pressure.

For rate markets, the bigger issue is not the politics itself—it is whether policy pressure collides with an inflation picture that is still sticky. If that happens, bond traders usually choose skepticism first and optimism later. Charming crowd, really.

6) Market Analysis – What This All Means for Rates Going Forward

Base case: The Fed holds, the dot plot still shows at least one cut this year, but Powell stays careful and emphasizes inflation risk. That would likely keep mortgage rates volatile but range-bound, not dramatically better. This is my base-case read from the current data and market setup.

Hawkish surprise: If the statement or dots lean more openly toward a two-sided risk—meaning the Fed looks willing to acknowledge hikes as a live possibility—Treasuries could sell off and mortgage pricing could worsen.

Dovish surprise: If Powell emphasizes slowing growth and soft labor conditions more than inflation and energy, bonds could rally and mortgage rates could improve modestly. That said, today’s hot PPI makes a truly dovish message harder to pull off cleanly.

7) Practical Takeaways

For buyers, this is another reminder that waiting for the Fed to cut is not a strategy by itself. The better strategy is making sure the payment works with today’s terms and having a plan to improve it later if the market gives you a chance.

For agents, this is a good day to remind clients that housing activity can improve even when rates are still elevated, as yesterday’s pending sales number showed. The market is slower, not frozen.

For refinance conversations, this is a “watch the volatility” setup, not a “rates are about to fall off a cliff” setup.