Look Into the Markets
What a week it’s been. The economy’s been tossing out some curveballs, but there’s also some good news in the mix. Interest rates are looking a little friendlier, hitting their best levels in nearly a month. Still, it’s not all smooth sailing. Let’s unpack what happened and what it might mean for the week ahead.
“Take this job and shove it, I ain’t working here no more.”
— Take This Job and Shove It by Johnny Paycheck
“Any further cooling in the labor market would be welcome.”
— Jerome Powell
Labor Market Woes
Tuesday came in rough. The ADP report showed just 37,000 jobs added in May—way below the 110,000 analysts were expecting. That’s a serious miss.
Initial Jobless Claims also hit the highest level in four years. More people are filing for unemployment than we’ve seen in a long time.
Then we got the ISM Services PMI, which dropped to 49.9 from 51.6 in April. That signals contraction in the services sector for the first time since June 2024. Since services drive most of our economy, this is one to watch. If it continues, it could start dragging growth down across the board.
Bond Market Bright Spot
Here’s where things start to look up. Bond prices rallied this week, pushing yields lower. The 10-year Treasury dropped below 4.40% for the first time in weeks. That’s a good thing. Lower yields = lower borrowing costs, including mortgage rates.
Europe’s Moving Fast
Over in Europe, the ECB cut rates by 25 basis points in April, bringing their deposit rate down to 2.25%. Why? Inflation’s under control over there, staying below their 2% target.
Meanwhile, the Fed here at home is staying cautious. We hit inflation harder than most countries after going big with stimulus and bond-buying back in 2020. That’s why inflation here has been more stubborn—and why rate cuts are taking longer.
Growth on the Horizon?
Here’s some potentially good news: The Atlanta Fed’s GDPNow model is projecting 4.6% growth for Q2 2025. That’s a sharp bounce from the -0.3% contraction in Q1.
Now, before anyone gets carried away, this number is early and could be revised—possibly by a lot. But it’s still a sign that recession fears may be a little overdone for now.
30-Year Mortgage Rates
The 30-year fixed mortgage rate averaged 6.85% as of June 5, 2025—down slightly from 6.89% the week before.
10-Year Note
As mentioned above, it’s a good sign that the 10-year yield dipped below 4.40%. Next key level to watch is 4.20%. The market hasn’t been able to break and hold below that in a long time.
Bottom Line
We’re stuck in a tug-of-war right now. On one side, we’ve got falling interest rates and a potentially strong growth outlook. On the other, we’ve got a weakening labor market and a shrinking services sector.
Uncertainty’s still high—but the economy is hanging in there.
Looking Ahead
Next week brings headline risk with the upcoming Consumer Price Index (CPI). Inflation has been cooling, which is welcome, but markets are watching closely.
We’ve also got a full week of Treasury auctions, where the government will sell billions in long-term bonds. These are key: weak demand can push rates higher, while strong demand helps pull them down.
Mortgage Market Guide Candlestick Chart
For homebuyers and refinancers, mortgage rates are driven by mortgage bond prices. The chart below tracks the Fannie Mae 30-year 6.0% coupon. It’s pretty simple: rising bond prices = lower mortgage rates. Falling bond prices = higher rates.
Right now, bond prices have bounced big—shown by a strong green candlestick—bringing the best rates we’ve seen in a month. We’re now approaching a ceiling of resistance around $101.50, which has capped further improvement for about eight months.