Markets reopen after Labor Day with bonds catching a modest bid: UMBS up 4-6 ticks, 10-year yield dipping below Friday's close. Thirty-year mortgage rates are unchanged at 6.89%, but the early tape is constructive heading into a week that ends with CPI and then the September 16 FOMC decision.
Bond markets came back from the holiday in better shape than they left. UMBS 6.0 opened around 101.16, up roughly 13 cents from Friday's 101.03 close. The 5.5 coupon moved similarly — up about 19 cents to 99.06. The 10-year Treasury yield eased to the mid-4.77% range, fractionally below where Friday's session ended. Nothing dramatic, but the direction is right.
The backdrop is still the same one that dominated last week: a labor market that refuses to crack, a Fed that hasn't yet agreed on what it will do September 16, and a set of inflation reports — PPI Thursday, CPI Friday — that will either validate the case for a hold or complicate it. Friday's August payroll number — 162,000 jobs added, unemployment at 4.1% — was strong enough to clear any lingering expectations of an imminent rate cut. What it didn't do was lock in a hike. Governor Waller's public argument for holding steady at the September meeting is still the most recent Fed signal on record. Chair Warsh's Jackson Hole remarks leaned the other direction. The bond market is threading between those two positions, and it shows: yields near 4.78% reflect a market that has priced in prolonged elevated rates without fully committing to another increase.
For borrowers, 6.89% is still near the top of the range this summer. Tuesday's calm is not a signal to wait indefinitely — inflation data this week moves rates in both directions, and the Sept 16 FOMC decision carries real risk. If CPI comes in soft Friday, yields have room to pull back and mortgage rates could follow modestly lower before the meeting. If inflation surprises to the upside, the pressure that pushed rates to a 15-month high last week could resume. Borrowers with a strong rate target and the financial capacity to close have a narrow window this week before the data and the Fed's response take the decision away from them.
PPI prints Thursday. CPI prints Friday. FOMC decides September 16.
— David Burson, NetRate Mortgage