This is Matt Graham with the MBS Live Market update. Last week delivered on the promise of volatility in response to economic data, there was a full slate of it, and of course, Friday’s big jobs report was the main event. Before that, bonds began the week in moderately weaker territory with a little bit of a move up in treasury yields to around 4.3% from the previous week’s 4.24 but that was quickly reversed with help from econ data, the first major instance of that occurred on Wednesday morning with the release of the jolt data. That’s job openings and labor turnover survey. The job opening statistic was the important one, and it came in at 7.18 versus 7.4 million forecast the lowest reading of this cycle. Bonds didn’t have a huge reaction, but they moved to the lowest levels of the week at that point. The following day saw additional gains, and while there was economic data, the movement didn’t align perfectly with that. In fact, right after the slightly weaker ADP report, bonds lost a small amount of ground. Same story after ISM non-manufacturing PMI which came out one point higher than expected, but was offset by weaker employment and slightly lower price data. Friday’s jobs report, again, the big ticket, and it was much weaker than expected. When it comes to non-farm payrolls counts. The miss that we saw in this case, which was 22K versus 75K is not the biggest that you’ll ever see, but it is adding to the narrative that the labor market is shifting into weaker gear and bonds picked up on that with a rally that took treasury yields to their best levels since April and took mortgage rates to their lowest levels since August of 2024. Expectations for fed rate cuts also logically increased with the September cut being fully priced in and three cuts being priced in by the end of the year. In fact, there is a greater than 0% chance of a 50bip cut as far as fed funds futures are concerned at the September meeting, but that could change drastically in either direction after this week’s inflation data, specifically important as always, is CPI on Thursday morning at 8:30 AM Eastern Time. Markets are expecting a 3.1% core year over year reading after last month’s 3.1%, but details will matter. Investors are more willing to overlook any increase in core goods inflation, especially in categories that are more readily linked to tariffs. But if inflation is broadening out and seen across the spectrum in non tariff impacted categories, then it could give the Fed a bit more pause when it comes to being aggressive on rate cuts. Nonetheless, investors feel that there will be at least a 25 bip rate cut at this meeting regardless of what happens with the inflation data as a reminder for those who need it, mortgage rates have already improved in response to all of this, and when the Fed actually cuts, it will not have an additional incremental impact on rates. If there is a reaction on Fed Day in September, it will be due to something that comes out in the DOT plot, which is the in a Fed summary of economic projections. And provides a representation of where each Fed member views the appropriate Fed funds rate at various points in the future. That’s gonna do it for this week. Back to you.
Matt Graham, Founder and CEO, MBS Live
Matt began as an originator in 2002. He fell in love with the idea of following MBS in real-time but felt that existing products were only scratching the surface. Thus was born MBS Live in 2007, the first-of-its-kind platform with real-time market data/analysis, and live chat with analysts, traders, and originators around the country. He is currently the Founder and CEO of MBSLive!
He’s been covering bond/mortgage markets, writing commentary, alerts, and chatting with the live community every business hour of every business day ever since.
Matt also serves as the Chief of Operations for mortgagenewsdaily.com, where he is one of the industry’s most respected mortgage rate experts, frequently quoted in the media. Mortgage News Daily’s rate index is used as the definitive resource on day-to-day mortgage rate averages.
He lives in the Pacific Northwest with his wife and son where he enjoys skiing, fishing, coaching youth sports, playing the guitar, and more DIY projects/hobbies than he’d care to admit.