Good Friday AM from your Hometown Lender,

I am going to lead with this note today… After reaching a post-pandemic high of 7.8% last fall, the average 30-year mortgage rate is now expected to end the year below 6%, according to analysts at Fannie Mae.

Hopefully, that softens the blow that rates have ticked up this week on some mildly stronger than expected data. The 10 yr has backed up 25bps and mortgage are off about twice that.

Bond traders though are increasingly convinced that the inversion in US Treasury yields is headed toward normalizing, though how and why this happens will mean volatility will continue. Why is this important? Well first, the question being asked is whether yields will sink on the short-end of the curve as rate cuts emerge, or whether 10-year yields will rise more in a higher-for-longer scenario. The Federal Reserve continues to push back against current wagers for rate cuts, with Raphael Bostic the latest to urge caution given the global uncertainty overshadowing 2024. Second, the un-inversion of bond yields is typically the start of a recession. That is most often when the short-term rates drop below the long terms rates so if the un-inversion happens with long term yields rising, this may have the same result. The Fed’s Austan Goolsbee and Mary Daly are due to speak on Friday.

Despite the trajectory of interest rates being our number one concern, Central Bankers and Business Leaders have shifted their focus to Global safety as the most important economic driver. Specifically, wars in Ukraine and Israel, terrorist activity in the Red Sea and uncertainty in Taiwan are seen as having the most impact on the global economy this year.

That all said, the public expects rates to drop…

That’s a wrap for today.

Please remain safe and healthy, enjoy the weekend and first, make today great!