What Happened Last Week?
Mortgage Rates Plummet Back to Fall 2024 Levels
It’s a well-known fact that the monthly jobs report is more capable of causing big reactions in rates than any other economic data. It happened last month in grand fashion, and it is happening again this morning. Nonfarm Payrolls (NFP), which is a count of new jobs created, came in at a mere 22k for August versus a median forecast of 75k. This is actually not the biggest miss when it comes to NFP, but it’s big enough to spark a reaction in the bond market. In general, weaker jobs numbers prompt investors to buy bonds. When investors buy bonds, the price of those bonds goes up. When bond prices go up, rates go down. Friday’s net effect was an average top tier 30-year fixed rate drop from 6.45% Thursday to 6.29% Friday. This is back in the same range as the low rates in the fall of 2024.
Source: Matthew Graham, Mortgage News Daily 9/5/2025)
Three Things
The three areas that have the greatest ability to impact MBS backend pricing this week are: (1) The Talking Fed,( 2) Inflation Nation and (3) Geopolitical.
(1) The Talking Fed: While the Fed is on a media blackout leading into next week’s FOMC meeting, there is still plenty of speculation (and drama) for the markets. Right now, the bond market is fully on board with at least a 25 BPS cut, however fluctuations in pricing may be based on the ebb and flow of speculations of a 50 BPS cut. That of course goes along with the following:
Will Stephen Miran be confirmed in time and can vote?
Will fired Gov Cook be allowed to vote?
The “12” has been narrowed down to Hasset, Warsh and Waller, will one of them break out this week as the favorite? Or will we get an official pick?
(2) Inflation Nation: PPI and CPI are this week with CPI getting the most weight. The bond market will be focusing on if tariffs are pushing inflation higher. And if so, how could it impact the Fed’s decision on 25BPS or 50BPS at their next meeting.
(3) Geopolitical: The PM of Japan has resigned, and it is expected that the PM of France will be out as well. Tariffs are also still very much in the spotlight with legal action and concerns over India and South Korea.
Central Bank Palooza
There will be an important Interest Rate Decision and Policy Statement out of the European Central Bank on Thursday.
Treasury Dump
There are three important auctions this week:
- 09/09: 3-year note
- 09/10: 10-year note
- 09/11: 30-year bond
Market Wrap-up
The Talking Fed: The August NY Fed Survey of Consumer Expectations showed that 1-year inflation expectations rose from 3.1% to 3.2% but the 3-year horizon remained at 3.0%.
The Consumer: The July Consumer Credit Change jumped from $7.37B to $16.01B versus estimates of $10.1B.
On Deck for Tomorrow: NFIB Small Business Optimism, 3-year Treasury Note Auction, BLS Payroll Revisions.