This past week, interest rates improved in response to bond-friendly news. Let’s dive into what happened and peek at the week ahead.

“Here comes the sun. Here comes the sun, and I say
It’s all right.”
— Here Comes the Sun by The Beatles

Inflation Eases Further

The May consumer price index showed inflation cooling more than expected. Headline CPI, which includes food and energy, came in at just 2.5% year-over-year, the lowest we’ve seen in four years. The core CPI, which strips out food and energy and is the Fed’s preferred gauge, stayed steady at 2.8%—a bit better than the 2.9% economists had been expecting.

The Fed’s got to like seeing inflation move in the right direction. This sets the stage for potential rate cuts later this year. The bond market agrees: the 10-year Treasury note, which was sitting at 4.50% before the report, dipped into the low 4.30s. That gave mortgage rates a bit of a breather too.

US-China Trade Progress

On the trade front, there’s some positive momentum between the US and China. Recent talks have focused on easing tariff and export restrictions, especially on tech and manufacturing goods. Both sides seem to be inching toward an agreement that could stabilize supply chains—something businesses have been wrestling with.

The US wants fairer access to Chinese markets, and China looks ready to dial back some restrictions on its tech companies. No major deals signed yet, but the tone is less combative than it’s been in a while. If this progress continues, it could relieve pressure on global markets and help keep interest rates from spiking as supply chain costs ease.

Long-Term Auctions

There’s been a lot of chatter about our growing debt and deficits. The government funds those deficits by selling bonds, so strong demand at Treasury auctions is key to keeping interest rates in check.

Good news: the Treasury recently auctioned a big batch of 10-year notes, and demand was solid. That helped nudge interest rates down a bit. Healthy bond buying is a win for rates staying manageable.

30-Year Mortgage Rates

The 30-year fixed mortgage rate averaged 6.84% as of June 12, 2025, according to Freddie Mac. That’s a slight dip from earlier this year when rates flirted with the low 7s, thanks to cooling inflation and strong Treasury auctions. Still high compared to a few years ago, but this gives some relief to buyers and refinancers watching affordability closely.

4.50% As a Key Level

The 4.50% yield on the 10-year Treasury note has been a key ceiling for bond yields, keeping rates from climbing higher over the past month.

If this ceiling holds, 4.50% will likely mark the upper limit for rates for now. On the flip side, if inflation keeps cooling and bond demand stays strong, rates could trend lower from here.

Bottom Line

There’s still a lot of uncertainty around taxes, regulations, tariffs, and more. For now, many companies are in a holding pattern—not hiring aggressively, but not firing either. Interest rates are stuck in a sideways range as a result.

Once some of this uncertainty clears up, we’ll get a clearer picture of where rates and the economy are headed. Until then, watch inflation reports, trade talks, and Treasury auctions closely—they’re the ones steering the ship.

Looking Ahead

Next week is Fed week. The Federal Reserve meets and will share their interest rate decision and updated outlook on rates, inflation, and the economy.

No chance for a rate cut this time, but what the Fed says about recent low inflation numbers will be closely watched. There’s been a lot of calls for the Fed to start cutting because inflation is well below the Fed Funds Rate—a pattern that has historically led to cuts.

Outside the Fed, there aren’t many high-impact economic reports due next week, so market direction will mainly hinge on the Fed and ongoing tariff negotiations.