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Market Analysis 9.4.25: Getting Slightly Better

Good Thursday AM from your Hometown Lender,

Rates again getting slightly better…

This time with some help from unemployment claims and the ADP private payroll data (ADP showed only 54k new jobs created). Both came in showing a weaker than expected labor market, after getting the same kind of signal from yesterday’s JOLTS data. Bonds continue to improve, and expectations of a September Fed rate cut remain locked in. What is changing though are expectations of more cuts this year, with markets starting to wonder if we may see three cuts rather than just two.

A lot riding on tomorrow’s BLS jobs data.

More weakness will pump up speculation about three Fed cuts, and would help bonds rally some more and rate sheets improve. However, if data comes in stronger than expected, we likely see bonds lose a bit of ground. But – and this is big – after the last couple of days, even a stronger jobs report tomorrow will only be a temporary road block and we don’t have to worry about rates moving much higher than here. The bar is low for tomorrows report. Only 75k new jobs are expected. We have averaged more than double that this year. If we get a low reading, rates likely hold close to where we are but if we get a strong print, rates will worsen. I would not float into this report. 

Here’s some higher level analysis.

🏦 Mortgage Market Overview — September 4, 2025

InstrumentLevelDirection
30-yr Fixed Mortgage6.45%-0.04%
15-yr Fixed Mortgage5.81%-0.04%
UMBS 30-yr 5.5100.75+0.17
10-yr Treasury Yield4.18–4.19%-0.04

📰 Today’s Economic Data and Read-Through

  • Initial jobless claims: 237K vs. 230K consensus.
    Take: Slight softening in labor demand; modestly rates-friendly. Supports gradual Fed easing if payrolls/earnings corroborate Friday.
  • ADP employment change (Aug): 54K vs. 65K consensus.
    Take: Directionally soft; not a direct NFP proxy but lowers the bar for a cooler payrolls print. Bonds mildly supportive.
  • Nonfarm productivity (Q2 rev.): 3.3% vs. 2.4% est.
  • Unit labor costs (Q2 rev.): 1.0% vs. 1.6% est.
    Take: Productivity up + labor costs down = disinflationary mix. Rates- and MBS-friendly if sustained.
  • Trade balance (Jul): -$78.3B vs. -$75.7B est.
    Take: Wider deficit trims GDP tracking; modest bond-supportive amid softer growth.
  • ISM Services (Aug): 52.0 vs. 51.0 est.; Employment 46.5; Prices Paid 69.2.
    Take: Headline expansion; weak employment subindex + modest price cooling = mixed inflation signal. Net effect: sideways.

Market reaction snapshot: UMBS 5.5 up ~17 ticks; 10-yr ~4.18–4.19% late morning; lenders showing minor improvements. Overnight strength > U.S. session sideways.

🏛️ Policy and Political Context

  • Fed setup: Market pricing a 25bp cut in September. Friday’s jobs report and next week’s CPI/PPI are decisive. Fed speakers today (Williams, Goolsbee) tone-watched, but payrolls dominate into weekend.
  • Housing backdrop: Affordability modestly better as rates cooled and price growth slowed in pockets, but conditions remain tight; younger buyers delaying purchases, shaping demand narrative.

🔮 Forward-Looking Considerations for Mortgage Rates

  • Jobs Friday pivot: Sub-consensus NFP + softer earnings → 10-yr lower, incremental lender improvements. Hot report → backup in yields, worse sheets.
  • Disinflation watch: Productivity + lower labor costs = friendly tape. If CPI/PPI confirm easing, spreads compress → better mortgage relief.
  • Technical posture: 10-yr flirting below 4.20% resistance. Sustained closes <4.20% = MBS support, reprice improvements.

📅 Weekly Economic Calendar & Implications

Remainder of this week (Sept 4–5):

  • Thu 9/4: Jobless claims, ADP, Productivity, Labor Costs, Trade Balance, ISM Services.
    Implication: Mixed-to-friendly; sets the table, doesn’t decide the meal.
  • Fri 9/5: NFP (~77K consensus), Unemployment (4.2–4.3%), Avg hourly earnings.
    Implication: Primary swing factor for near-term rates + Fed guidance.

Next week (Sept 8–13):

  • CPI, PPI, Consumer Sentiment inflation expectations.
    Implication: Cooler CPI → downward 10-yr pressure + spread compression; hot print → stalls relief.

📌 Strategic Takeaways for Clients

  • Lock vs. Float:
    • Closing ≤ 10 days: Lock ahead of NFP to avoid headline risk.
    • Closing > 3 weeks: Measured float reasonable; use intra-day strength to partial-lock.
  • Affordability Plays:
    • Emphasize 1–0 / 2–1 buydowns, targeted permanent buydowns, seller credits where available.
    • Leave DTI buffer for post-data reprices; pre-approve conservatively.
  • Messaging:
    • Core line: “Labor cooling and lower labor-cost pressure are beginning to line up with rate relief. Friday’s jobs report decides the pace.”

Posted by Noble Home Loans | Equal Housing Lender | NMLS #328275 |
For informational purposes only. Not a commitment to lend. Rates subject to change.

Stay safe and make today great!!!