This past week, mortgage rates kept their downward momentum, hitting their lowest levels in four months. Let’s break down what’s driving the market and what’s ahead.
“Lord, I’m Coming Home to You” – Sweet Home Alabama, Lynyrd Skynyrd.
The Bessent Bond Rally
A couple of weeks ago, Treasury Secretary Scott Bessent set his sights on driving down the 10-year Treasury yield—arguably the most important interest rate in the world. The 10-year directly influences 30-year mortgage rates, so when it drops, borrowing costs follow. And drop it has. Over the past two weeks, the yield has fallen from 4.62% to 4.25%, pulling mortgage rates lower along with it.
Trends Are Our Friends
Since mid-January, two key trends have helped rates: falling oil prices and declining bond yields. Oil peaked at $80 per barrel before sliding to $68—a $12 drop. That’s a major disinflationary force, which is exactly what the bond market wants to see. If this continues, rates could have more room to fall.
It’s More Than Inflation
What’s interesting about this rate rally is that it happened despite a hotter-than-expected CPI report just weeks ago. That tells us markets care more about where inflation is going than where it’s been. And with February’s oil price drop, next month’s inflation print could look much friendlier.
Bonds Thrive on Chaos and Uncertainty
Global growth concerns and tariff uncertainty are also fueling the bond rally. Nobody knows if tariffs will happen, when they’d kick in, or how inflationary they’d be. The result? Investors are piling into safe assets like U.S. Treasuries and the dollar, while stocks and crypto take a step back.
The 4.25% Level
The 10-year yield hitting 4.25% is a big deal. This level has acted as a support floor before, meaning it could slow or even reverse the drop in rates. Keep an eye on this number.
30-Year Mortgage Rates
The average 30-year fixed rate mortgage dropped to 6.76% as of February 27, 2025, down from 6.85% the week before.
Bottom Line:
Rates have been falling ever since Secretary Bessent started targeting the 10-year yield. But no rally is a straight line—expect bumps along the way, especially with bonds now sitting at a key technical level.
Looking Ahead
Next week, the focus shifts to jobs. We’ll get fresh data on job openings, hiring trends, and, most importantly, Friday’s jobs report. The market is expecting 155,000 new jobs—let’s see if the labor market plays along.
Mortgage Market Guide Candlestick Chart
Mortgage bond prices dictate home loan rates. The chart below shows a one-year view of the Fannie Mae 30-year 6% coupon. As prices rise, rates fall and vice versa. On the right side of the chart, you can see prices climbing steadily, now at their highest since October, translating to the lowest mortgage rates since then.
Chart: Fannie Mae 30-Year 6.0% Coupon (Friday, February 28, 2025)
Economic Calendar for the Week of Week of March 3 – 7
