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Market Snapshot 01/27/2025 – Treasuries Are Rallying

Good Monday AM from your Hometown Lender,

Treasuries are rallying, with investors flocking to safer assets.

The 10-year US yield fell to 4.52%, the lowest since Jan. 2. Haven currencies including the yen and Swiss franc are improving.

With improvement in the Treasury Market, rate sheets this morning are improving, as bonds get an unexpected boost from concerns over China’s AI tool Deep Seek. Showing just how jittery markets are, tech stocks plunged in premarket trading after Chinese startup Deep Seek sparked concerns over America’s lead in the AI sector and triggered a global sell-off in tech stocks that pushed money into bonds. Deep Seek is said to be equal to, if not better than, ChatGPT and does not need the expensive processors (ie. Nvidia). Reprice risk on the day is moderate, any time we see a large flight-to-safety like this we have to be concerned it could unwind, especially if any information comes out that discredits the story behind Deep Seek and its development.

Before China and it’s large-language model AI took over headlines this morning, the big news for this week would have been the Fed meeting that concludes on Wednesday. Markets are not expecting the Fed to make any changes to its policy rate at this meeting, after cutting the last three meetings. All eyes though will be on the policy statement and Fed Chair Jerome Powell’s press conference afterwards. Right now markets are pricing in a June Fed rate cut, and anything that supports or challenges that belief will affect mortgage rates.

A few other headlines to mention:

Donald Trump rattled overseas markets by announcing sweeping tariffs on Colombia before abruptly pulling the threat after reaching a deal on the return of deported migrants. The move sent the Mexican peso and South African rand lower.

China’s economic activity unexpectedly faltered, breaking the momentum of a recovery sparked by stimulus measures and underlining the need for Beijing to do more to prevent another slowdown. 

The euro-area economy’s sub-par performance is convincing the ECB that it can further loosen the shackles on growth by lowering interest rates this week for a fourth straight meeting.

And, here are the week’s highlights, with a lot of Asia marking the Lunar New Year:

  • Monday: U.S. new home sales.
  • Tuesday: U.S. durable goods and consumer confidence.
  • Wednesday: Fed rate decision, no change expected. Bank of Canada rate decision — a quarter-point cut is predicted. Brazilian central bank rate decision — a hike is expected.
  • Thursday: First reading of U.S. gross domestic product for the last quarter. Bloomberg survey points to an annualized 2.7% increase. European Central Bank rate decision — a quarter-point cut is forecast
  • Friday: Euro-area GDP report. 1% growth is projected. U.S. personal consumer expenditure data.

Stay safe and make today great!!!