The bond market opened the week
with a tone of quiet strength. Yields across the curve edged lower, with the
10-year Treasury yield dipping to 4.37% on Monday, reflecting a modest rally in
longer-duration assets. This move came despite a relatively light calendar of
economic data and Fed commentary. Market participants attributed the gains to
technical positioning and broader risk sentiment, as equities hovered near
all-time highs and mortgage-backed securities (MBS) traded in line with
Treasuries. The MBS basis remained stable, with investors favoring carry over
spread compression in the near term.
So You're Telling Me There's a
Chance!
Although the Federal Reserve isn’t
expected to take action next week, speculation around a potential rate cut at
the July FOMC meeting continues to simmer. Fed Governor Christopher Waller
recently voiced support for a 25-basis-point cut, citing signs of labor market
cooling and the temporary inflationary effects of new tariffs. Still, mixed
signals—including political noise around Chair Powell’s future—have added
uncertainty to the Fed’s path. For now, markets are pricing in a cautious
stance, with the probability of a July cut sitting at just 2%.
Mixed Inflation Signals Keep
Markets Guessing
Last week’s inflation data offered
a mixed picture. The Consumer Price Index (CPI) showed a slight uptick, driven
by energy and import costs, while the Producer Price Index (PPI) came in cooler
than expected, suggesting easing upstream pressures. These conflicting signals
have left investors in a holding pattern, awaiting further clarity from
upcoming data releases. Meanwhile, mortgage rates continued their gradual
decline, with the average 30-year fixed rate falling to 6.75%, marking the
fourth straight day of modest improvement.
Key Economic Data Releases this
Week:
- Tuesday,
July 22: Richmond Fed Manufacturing Index
- Wednesday,
July 23: Existing Home Sales
- Thursday,
July 24: Weekly Jobless Claims, New Home Sales, S&P US Services
WEEKLY INTEREST RATE SNAPSHOT
