Good Tuesday morning from your Hometown Lender. Here’s today’s busy market analysis breakdown!
Yesterday bonds sold off in the afternoon after President Trump broke the news that the U.S. will be the “guardian” of the Strait of Hormuz, and will impose fees “at the rate of 20% on all cargo shipped.” Trump also said the U.S. will reimpose the blockade against Iran’s ships, and continue attacks. Oil prices jumped and bonds sold off.
Rate sheets today got a temporary reprieve this morning as bonds rallied early on prepared testimony from Fed Chair Kevin Warsh to Congress and the first taste of actual deflation (not disinflation) in six years. The CPI inflation data came in even lower than anticipated for June, a reflection of the drop in oil and gas prices after a deal with Iran had been reached. After yesterday’s comments from Trump, Fed futures were betting on over 40% chance of a Fed rate hike at this month’s meeting… a big change in the outlook. This morning, after the inflation data, now back down to a 12% chance.
I think this is definitely an overreaction, since the deal with Iran has fallen apart and oil is back rising steadily. It’s kind of short sighted to pretend that June’s inflation numbers could continue in the face of all that. I think markets will whipsaw and today’s improvement will be a memory soon enough. As it is, it still only wipes out yesterday’s losses, and doesn’t really make much of a dent in the bigger picture.
Market Analysis – From a higher and better view:
Market Analysis – Quick Snapshot
- Bonds: The 10-year Treasury moved lower after this morning’s CPI report came in cooler than expected, giving bonds a welcome boost. Sometimes inflation actually does send a thank-you note. (Reuters)
- Mortgage Rates: Mortgage pricing is improving this morning following the CPI release. Daily 30-year fixed rates remain in the mid-6% range, with many lenders expected to improve rate sheets as the bond rally develops. (Reuters)
- Inflation: June CPI came in better than expected. Headline inflation slowed to 3.5% year over year from 4.2% in May, while prices fell 0.4% for the month, the first monthly decline in more than six years. Core CPI was flat for the month and slowed to 2.6% annually. (Reuters)
- Fed Watch: The softer inflation report reduced expectations for an immediate Fed rate hike. Markets now see the Fed as more likely to remain on hold in July while continuing to monitor inflation trends. (Investing.com)
- Oil / Geopolitics: One caution: today’s inflation improvement was helped significantly by lower June gasoline prices. Since then, renewed U.S.–Iran tensions have pushed oil back above $80 per barrel, meaning future inflation reports may not look as friendly. (Reuters)
- Markets: Stocks opened higher while Treasury yields fell as investors welcomed the inflation data and the start of bank earnings season. (Investing.com)
Market Analysis – What It Means
Today’s CPI report is the best inflation news we’ve seen in months. Lower inflation helped bonds rally and should provide modest improvement in mortgage pricing.
In plain English: This is welcome news—but one report doesn’t end the inflation story. Oil prices and geopolitical events could still create volatility.
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 building a refinance strategy if rates improve further.
Today’s CPI report is encouraging, but affordability remains the biggest hurdle for many buyers.
Lock vs. Float
- Lock bias: If closing within 15–30 days, today’s improvement creates an opportunity to secure better pricing.
- Float bias: Longer timelines may benefit if inflation continues to cool, but rising oil prices and tomorrow’s PPI report could quickly reverse today’s gains.
Today’s guidance:
Lock if you’re close to closing and today’s pricing meets your goals. For longer timelines, floating can be reasonable—but with a clear risk strategy.
Stay safe and make today great!