MMG Weekly | May 13, 2024

A Look Into the Markets

This past week, interest rates held steady or moved sideways after the nice decline we experienced a couple of weeks ago. Let’s discuss what happened and look at the news items in the week ahead.

Fed Speakers Toeing the Line

“Eventually we’ll have rate cuts, but for now monetary policy is in a very good place,” New York President, John Wiliams.

A couple of weeks ago Fed Chair Jerome Powell told the world that there will not be a rate hike nor will there be a cut. This past week, several Fed officials (including Williams quote above) reiterated the notion that a Fed rate cut is not imminent and that they will keep rates higher for longer if needed.

The Fed Funds Futures, which prices in the probability of Fed rate hikes and cuts, is now pricing in a rate cut for September. Just two weeks ago, the chance of an initial rate cut was in November. This highlights how fast markets can change.

Debt Remains a Headwind

Last week, our Treasury Department needed to sell bonds to fund our government. The longer-dated bond auctions like the 10-year Note carry added significance because long-term bonds are subject to inflation risk and opportunity cost.

On Wednesday, the Treasury Department sold a record number of 10-year Notes and the buying appetite was not that great. This means there were not a lot of bids to purchase the bonds at current rates, so rates did not improve. However, it could be viewed as a victory. Remember…the previous 10-yr auction on April 10th was very bad and pushed the 10-year Note yield sharply higher and mortgage-backed securities prices sharply lower.

As the U.S. continues to run federal deficits, it needs to sell bonds to run the government. These bonds must be purchased by the investment community and if the appetite going forward remains tepid, it will put a limit to rate improvement.

Initial Claims Rise

In another sign that the labor market is cooling off, Initial Claims for the past week rose well above expectations. This forward-looking index on labor market health shows more people filing for first-time unemployment benefits. If this trend continues and elevates the unemployment rate, it will strengthen the case for a Fed rate cut sooner.


The 10-year Note, which ebbs and flows with 30-year mortgage rates, has declined from the highs of the year and is residing near 4.50%. For rates to improve further, we want to see the 10-yr move beneath 4.50% and then 4.35%. Look at the chart section below to see similar technical headwinds for mortgage-backed securities and mortgage rates.

Bottom Line: We must remember the Fed is not hiking rates and they are not cutting rates, so further improvement will be in response to the data. Next week, things heat up.

Looking Ahead: Next week brings some high-impact economic readings. The main event will be the consumer price index. It was this reading back on April 10th that caused interest rates to spike higher and caused the Fed to move into their higher-for-longer stance. If the CPI reading is hot, bonds will not like it, the opposite is true.

Also, out next week will be Retail Sales, manufacturing numbers, and housing data.

Mortgage Market Guide Candlestick Chart

Mortgage bond prices determine home loan rates. The chart below is a one-year view of the Fannie Mae 30-year 6.0% coupon, where currently closed loans are being packaged. As prices move higher, rates decline, and vice versa.

If you look at the right side of the chart, you can see how prices have bounced off the lowest levels of the year. Next week’s Consumer Price Index may determine if prices can improve after this sideways move or if they will retreat causing rates to move higher.

Chart: Fannie Mae Mortgage Bond (Friday May 10, 2024)


Economic Calendar for the Week of May 13 – 17

John Higgins

NMLS #136061

The material contained in this newsletter has been prepared by an independent third-party provider. The content is provided for use by real estate, financial services and other professionals only and is not intended for consumer distribution. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee it is without errors.

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.


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