Weekly Market Update

[Andrew Postell]

The bond market opened the week with a tone of quiet strength. Yields across the curve edged lower, with the 10-year Treasury yield dipping to 4.37% on Monday, reflecting a modest rally in longer-duration assets. This move came despite a relatively light calendar of economic data and Fed commentary. Market participants attributed the gains to technical positioning and broader risk sentiment, as equities hovered near all-time highs and mortgage-backed securities (MBS) traded in line with Treasuries. The MBS basis remained stable, with investors favoring carry over spread compression in the near term.

So You're Telling Me There's a Chance!

Although the Federal Reserve isn’t expected to take action next week, speculation around a potential rate cut at the July FOMC meeting continues to simmer. Fed Governor Christopher Waller recently voiced support for a 25-basis-point cut, citing signs of labor market cooling and the temporary inflationary effects of new tariffs. Still, mixed signals—including political noise around Chair Powell’s future—have added uncertainty to the Fed’s path. For now, markets are pricing in a cautious stance, with the probability of a July cut sitting at just 2%.

Mixed Inflation Signals Keep Markets Guessing

Last week’s inflation data offered a mixed picture. The Consumer Price Index (CPI) showed a slight uptick, driven by energy and import costs, while the Producer Price Index (PPI) came in cooler than expected, suggesting easing upstream pressures. These conflicting signals have left investors in a holding pattern, awaiting further clarity from upcoming data releases. Meanwhile, mortgage rates continued their gradual decline, with the average 30-year fixed rate falling to 6.75%, marking the fourth straight day of modest improvement.

Key Economic Data Releases this Week:

• Tuesday, July 22: Richmond Fed Manufacturing Index
• Wednesday, July 23: Existing Home Sales
• Thursday, July 24: Weekly Jobless Claims, New Home Sales, S&P US Services