Good Thursday morning from your Hometown Lender. Let’s get to Thursday’s market analysis!
Yesterday saw bonds rally through the morning, then flatten out and hold the gains through the rest of the day. The problem is that no one could agree why bonds improved, and if the gains were for real. Rates today will be quite a bit better than yesterday morning pricing, probably as much as .125% in rate better than a couple of days ago… but will they continue to improve, and why would that be the case?
Well, now that the PCE inflation data and final Q1 GDP numbers are out of the way, we’re left to consider what markets are telling us. The PCE data came in basically at estimates, which was high at 4.1% from a year earlier and 3.4% for the core. Markets were already expecting high inflation due to the conflict in the Middle East and the economic effects, so it was possible we would see a more tempered reaction from traders now that there is a deal in place and oil prices are falling. The Q1 final GDP came in higher than expected at 2.1% versus 1.6% expected.
The stronger economic picture and hot inflation should have pressured bonds to sell off today and give back some of yesterday’s gains, but that’s not what happened. Instead, bonds went from being down a bit to start the day to push up into the positive. An argument could be made that the improvements are a delayed reaction to the falling price of oil and the reopening of the Strait of Hormuz.
We do want to watch mortgage bonds today to see if they can stay above recent technical highs. If bonds can’t hold this morning’s gains, it could signal that this is as good as it gets for now. However, if mortgage bonds can hold the gains, we could squeak out a little bit more tomorrow.
Market Analysis – From a higher and better view:
Market Analysis – Quick Snapshot
Bonds: The 10-year Treasury eased to around 4.38% after today’s PCE inflation report came in mostly as expected. Bonds got a little relief — not a standing ovation, but at least they stopped booing.
Mortgage Rates: Daily tracking shows the 30-year fixed around 6.60% and the 15-year fixed around 5.96%. Freddie Mac’s latest available weekly survey showed the 30-year fixed at 6.47% and the 15-year fixed at 5.81%.
Inflation: May PCE inflation rose 4.1% year over year and 0.4% month over month. Core PCE rose 3.4% year over year, still well above the Fed’s 2% target.
Economy: Q1 GDP was revised higher to 2.1%, but consumer spending was revised sharply lower to 0.5%, showing the headline economy looked stronger while the consumer looked softer.
Labor: Initial jobless claims fell to 215,000, but continuing claims rose to 1.821 million. Layoffs remain low, but hiring appears more selective.
Housing / Politics: New-home sales fell 7.3% in May, while Congress advanced an affordable housing bill. Helpful headlines, but affordability is still the real boss in the room.
Market Analysis – What It Means
Today’s tone is mixed. The bond market liked that inflation was mostly in line with expectations, but PCE is still too high for the Fed to relax. The economy looks decent on the surface, but weaker consumer spending and rising continuing claims show some strain underneath.
In plain English: rates got a little breathing room, but buyers still need a payment strategy.
Market Analysis – Housing & Mortgage Strategy
This remains a structure-the-payment market.
The best conversations right now are about:
Seller credits, temporary buydowns, permanent buydowns, builder incentives, ARM options where appropriate, and a realistic refinance plan if rates improve later.
Buyers are still active, but they are doing math. Sellers and builders who help solve the monthly payment problem have the best chance of turning interest into contracts.
Lock vs. Float
Lock bias: If closing within 30 days, the borrower is payment-sensitive, or the file is tight, locking remains the cleaner recommendation.
Float bias: Today’s bond improvement is helpful, but inflation is still elevated and Fed policy remains cautious.
Today’s guidance:
Bias toward locking short-term closings. For longer timelines, cautious floating may be reasonable only with a clear risk ceiling and daily monitoring.
Stay safe and make today great!