A Look Into the Markets
This past week, interest rates edged slightly higher amid another volatile period. Let’s break down what happened and preview the week ahead.
“Where do we go now?” – Sweet Child O’ Mine, Guns N’ Roses.
Stock/Bond Relationship: An Unusual Twist
Conventional wisdom says when stocks drop, rates should follow as investors move into bonds. This week? Not so much. A sharp 1,400-point sell-off on the Dow, driven by tariff uncertainty and slowing growth fears, should have pushed rates lower. Instead, bonds ran into technical resistance, capping any improvement. And when stocks rebounded slightly on Wednesday? Rates ticked higher—a clear break from the norm.
Inflation Cooling Down
February’s Consumer Price Index (CPI) showed inflation cooling, helped by oil prices sliding from $80 in mid-January to the low $70s. Core CPI dropped to 3.1% year-over-year, the lowest since last summer. Even better, the monthly 0.2% reading aligns with an annualized pace of 2-2.5%, putting the Fed’s 2% target within reach.
The Cleveland Inflation Nowcast projects the Fed’s preferred inflation gauge, Core PCE, will hit 2.47% by the end of March. If that holds, it undercuts the Fed’s own forecast that inflation wouldn’t drop below 2.5% this year—a potential game-changer for rate policy.
Tariff Uncertainty Persists
Markets remain unsettled by shifting tariff policies—some added, some removed, some negotiated. The Fed appears less worried about tariffs themselves and more about the uncertainty they create, along with signs of a slowing economy.
Treasury Auctions Struggle
Last week, the Treasury Department auctioned billions in new debt to keep the government funded. Weak demand pushed rates higher, preventing a bigger drop in borrowing costs.
Technical Levels: The 4.20% Barrier
The 10-year Treasury yield has yet to close below key support at 4.20%. Until that happens (and holds for two days), mortgage rates will have a tough time moving lower.
Bottom Line
After nearly two months of steady improvement, rates have hit a ceiling. Uncertainty around tariffs, inflation, and economic growth is muddying the outlook. The next move will depend on clearer signals from policy or data.
30-Year Mortgage Rates
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The 30-year fixed rate averaged 6.65% as of March 13, 2025, up slightly from last week’s 6.63%.
Looking Ahead
The Fed Meeting – The Big One
No rate cuts expected, but the Fed’s updated Summary of Economic Projections (released every three months) could be a market mover. Expect fresh forecasts on growth, unemployment, inflation, and rates—especially in the context of tariff debates, government downsizing, and debt ceiling talks.
Retail Sales – Consumer Strength Check
With nearly two-thirds of economic growth tied to consumer spending, this report will be key.
Mortgage Market Guide Candlestick Chart
Mortgage rates move with mortgage bond prices. The chart below tracks the Fannie Mae 30-year 5.5% coupon over the past year. The rule is simple: rising bond prices = falling mortgage rates. Recent red candlesticks on the right? Bond prices slipping = rates ticking higher.
Chart: Fannie Mae 30-Year 5.5% Coupon (Friday, March 14, 2025)
Economic Calendar for the Week of Week of March 10 – 14
