In what has been a consistent theme since the Federal Reserve (Fed) first lowered interest rates last September,1 the bond market is pushing back against the Fed’s plan to ease credit conditions. The recent rise in long-term Treasury yields suggests bond investors are starting to question Fed Chair Powell’s view that monetary policy is in “restrictive territory.”2,3
The recent rate rise is starting to pinch certain sectors of the economy, particularly the housing market. Last week’s housing data, Mortgage Bankers Association (MBA) Mortgage Applications and Construction Spending, came in well below expectations.4 The combination of elevated home prices and mortgage rates above 7% is keeping housing affordability near the most challenging in decades.
Friday’s jobs report tops this week’s economic calendar with forecasters expecting job growth of 160,000 and the unemployment rate holding steady at 4.2%.5
Sources:
1CNBC – Fed slashes interest rates by a half point, an aggressive start to its first easing campaign in four years; 9/18/24
2CNBC – 30-Year Treasury Yield; as of 1/6/25
3Yahoo! Finance – Powell calls Fed policy 'restrictive,' but keeping options open; 11/9/23
4Bloomberg
5The Economic Times – Jobs growth in December helps US end 2024 on consistent note; 1/5/25
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