It's a rough open to the week for rate watchers. Treasury yields are climbing again, stocks and mortgage bonds are both lower, and mortgage bonds are now testing a level of support that's held up so far — but is worth keeping an eye on as the week unfolds.
01What's moving markets this morning
Bond pricing is worse in early trading as Treasury yields push higher. The 10-year Treasury yield is sitting around 4.72%, above this morning's open near 4.68%, extending a climb that's followed a run of mostly cooler economic data. Last week's Consumer Price Index came in right in line with expectations, and July retail sales missed the mark, falling 0.6% against a forecast for a modest gain — the first monthly decline since October.
Normally, softer spending and in-line inflation would be an easy win for rates. But this cycle has a twist: the debate at the Fed's September meeting isn't cut-versus-hold, it's hold-versus-hike. Markets are currently pricing roughly a 69% chance the Fed leaves rates unchanged next month, with the rest of the odds still on a quarter-point increase — a live possibility that's kept yields from settling down even as the data cools. The Fed's minutes from its July meeting, where three members actually voted for an immediate hike, are due out Wednesday and could offer more clarity on how close that debate really is. Housing data is also in focus this week, with the NAHB Housing Market Index, Housing Starts, and Pending Home Sales all on the calendar.
02Mortgage bonds are hanging on a thin line
Stocks and mortgage bonds are both lower to start the week, and mortgage bonds are now testing a level of support they'll need to hold. That support has lined up closely with a ceiling on the 10-year yield — the same level that's kept yields from breaking meaningfully higher over the past several weeks. As long as that ceiling holds, mortgage pricing has a floor to lean on; if it gives way, borrowers could see rates drift higher fairly quickly.
Dashed line marks the support level mortgage bonds are testing this morning — a level that's held on every prior test over the past several weeks.
This is the level to watch all week. A bounce here keeps mortgage pricing roughly where it's been; a break below it opens the door to further upward pressure on rates.
The Fed's next move is no longer a simple cut-or-hold question — and that added uncertainty is exactly what's keeping mortgage bonds pinned near this support level.
03Iran ceasefire expires, oil supply stays tight
Today also marks the official end of the 60-day ceasefire between the U.S. and Iran, though strikes and escalations have continued through much of the second half of that window. Despite the disruption, WTI crude is holding around $83 a barrel — higher than ideal, but better than many feared.
Energy Secretary Chris Wright gave an update on oil moving through the Strait of Hormuz: pre-conflict flow through the Strait ran about 20 million barrels a day, and that's dropped to roughly 9 million. Pipeline routes that bypass the Strait have made up some of the difference, leaving an estimated shortfall of around 5.5 million barrels a day — still significant, but smaller than some of the more alarming estimates circulating, which may not be capturing ships moving without transponders. Even with volumes holding up better than feared, higher insurance and shipping costs mean it still costs more to move the oil that is getting through. Softer global demand, especially out of China, has helped offset some of the pressure, but with no resolution in sight on the ceasefire, oil prices remain a risk to watch.
Rates are modestly higher to start the week, and the level mortgage bonds are testing right now matters — a hold here keeps pricing roughly stable, while a break lower could push rates up further. Between the Fed minutes on Wednesday, a fresh batch of housing data, and an unresolved Iran ceasefire, there's plenty on the calendar that could move things either way. If you're watching rates for a purchase or refinance, or you're a partner agent fielding client questions this week, it's a good week to stay close to a loan officer rather than lock in assumptions based on last week's numbers.