Mortgage rates reached a new year-to-date low after the Fed acknowledged concerns about the labor market, which reduced bond yields and mortgage spreads. Recent job growth averaged just 35,000 monthly over three months, so modest pickup toward 75,000 could satisfy policymakers and limit further rate declines. The 10-year Treasury yield moved from about 4.34% to 4.26% after the comments but has not broken below 4.18%, indicating markets need more economic weakness to push yields substantially lower. A 2025 forecast projected mortgage rates between 5.75%–7.25% and the 10-year yield between 3.80%–4.70%. Mortgage spreads improved to target historical levels, contributing to recent rate relief.
Since the last jobs report showed an average of just 35,000 jobs being created for the last three months, it won't take much to make the Federal Reserve feel better about the labor market. Even if job growth only picks up toward 75,000 per month, they might be perfectly satisfied with that jobs data. In two weeks we will have the final jobs week reports for the Fed to mull over before their September meeting.
Now the 10-year yield had a noticeable move on Friday as it was trading around 4.34% before the Jackson Hole comments from Powell came out, and then it drove bond yields down 10 basis points before closing out at 4.26%. However, we still haven't been able to break under 4.18% on the 10-year yield, despite a dovish stance from the Fed that the labor market is finally on its mind after the last jobs report.
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