We’ve seen some encouraging movement in mortgage rates lately, and it’s definitely worth paying attention to as we head into the spring buying season. In recent days, Mortgage-Backed Securities (MBS) have been on a notable upswing, gaining 24 basis points today alone. Simultaneously, the 10-Year Treasury yield is trending downwards, hitting levels we haven’t seen since December.
While we’re still about 100 basis points away from the lower rates we saw in late September, the current direction is undeniably positive. What’s driving this? A combination of factors, including potential signs of a softening labor market and relatively stable inflation, could be paving the way for a potential Federal Reserve rate reduction towards the end of Q2.
All Eyes on Friday’s PCE Report
This Friday’s release of the Personal Consumption Expenditures (PCE) report is crucial. As the Fed’s preferred inflation gauge, it holds significant weight. Forecasts suggest a slight uptick, but nothing dramatic. However, if the PCE data exceeds expectations, it could halt the current positive momentum and cause trading levels to plateau as we move into March.
What We’re Watching This Week:
We’re keeping a close eye on the following key economic indicators:
- Friday: PCE (Personal Consumption Expenditures) – This is the big one!
- Thursday: Pending Home Sales, Durable Goods Orders, Preliminary GDP, Unemployment Claims
- Wednesday: New Home Sales, Crude Oil Inventories
- Tuesday: Richmond Manufacturing Index, CB Consumer Confidence
Last Week’s Highlights:
- Existing Home Sales Expected to Improve This Year
- Home Builder Confidence Declines Amid Tariff Concerns
- Construction Activity Slows in January
- Jobless Claims Data Continues to Show a Consistent Trend
10YR US TREASURY CHART: (🔼 is bad for mortgage interest rates)
30YR UMBS CHART: (🔽 is bad for mortgage interest rates)
The Technical Outlook:
From a technical standpoint, mortgage bonds broke above their 200-day Moving Average last week, testing the price ceiling at 101.09. If bonds can surpass this level, there’s potential for further gains, with the next resistance level at the 101.39 Fibonacci level. Meanwhile, the 10-year Treasury closed below 4.50% last week, and declined on friday towards the next support level of 4.40%.
What This Means for You:
This positive trend in mortgage rates could translate to more affordable homeownership. However, it’s crucial to stay informed and understand that market conditions can change quickly. We’ll continue to monitor these developments and provide updates as needed.
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Stay tuned for our analysis of the PCE report next week!