Good Monday morning from your Hometown Lender,

There is not much data to be released this week.

We do have some B-tier reports, and the biggest event will be Fed Chairman Powell’s key note speech at the Jackson Hole symposium on Friday.  More on that in a moment.

Summertime trading is typically a bit weaker, especially at each end of the season, as traders enjoy the first few or last few days of vacation. That weakness this morning offset the moderate overnight strength and bonds are now moving into weaker territory all be it within the same trading channel. 

Rate sheets today will continue to see pricing slip a bit, and reprice risk on the day is moderate.

Although rates are still better than before the July jobs data came out a couple of weeks ago, mortgage rates are creeping slowly higher for no good reason other than traders need some volatility. Right after the jobs data came in weak with those huge revisions, markets were all in on Fed rate cuts, even starting to consider the possibility that the September cut could be a half-point cut like last year. Last week’s consumer inflation data wasn’t so bad, but the wholesale inflation data put a big question mark on the whole thing and wasn’t good for mortgage rates.

Fed Chair Jerome Powell will be speaking on Friday at the Jackson Hole Symposium, where he set the stage a year ago for a half-point Fed rate cut at the September 2024 meeting. This time around he may be much slower to commit, with the economy giving mixed signals between inflation and the labor market. Markets are already pricing in a September quarter-point cut and two cuts on the year.

If Powell says something that casts more doubt on a September cut, rate sheet pricing will worsen as markets give up hope. Right now, it would be a surprise to hear Powell say anything other than a cut is on the table, but the decision will be data-dependent. Despite some members who have called for the Fed to start cutting, the Fed seems to be comfortable leaving its rate unchanged to keep a lid on potential inflation until there are consistent signs the labor market is in trouble.

Stay safe and make today great!