(303) 500-3310 
Fax: (720) 306-4395 

 

(303) 500-3310 
Fax: (720) 306-4395 

 

Saturday, February 15, 2025
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Market Commentary

Updated on February 14, 2025 10:08:54 AM EST

Yesterday’s 30-year Treasury Bond auction didn’t go very well with the benchmarks we use to gauge investor demand indicating a fairly weak interest in the securities compared to other recent sales. Bonds had a slight negative reaction to the 1:00 PM results announcement, but it was short-lived. They eventually recovered to close near their best levels of the day. Still, the lackluster demand is problematic going forward because of the large amount of supply that is expected to be sold by the government in the coming months. Supply that exceeds the market’s appetite would pressure bond prices, leading to higher yields and mortgage rates. This is something that will be highly relevant in the near future.

January’s Retail Sales report was posted early this morning, revealing consumers spent far less last month than many had expected. The 0.9% decline in overall sales was much weaker than the 0.1% decline that was predicted by market analysts. An equally surprising number came in a secondary reading that excludes more costly and volatile auto transactions. That reading showed a 0.4% drop when it was predicted to rise 0.3%. These headlines are clearly good news for bonds and mortgage rates because they point to economic weakness. Consumer spending makes up over two-thirds of the U.S. economy. In other words, the fuel for economic growth just showed a major retreat.

What does this data do for the outlook of the economy and interest rates? It is too soon to use it in predictions. Just a single month of data, especially immediately after holiday shopping, isn’t enough to alter the Fed’s thinking. We can’t forget that January’s inflation data came in hotter than expected and December’s sales data was revised much higher than initially estimated. That said, if February’s sales numbers show similar results as today’s report without upward changes to January, we may see a debate start brewing about what the Fed will do and when they will do it. The Fed’s game plan has been based on the U.S. economy remaining resilient. If that changes, the Fed’s plan could change also.

Closing out this week’s economic calendar was Januarys Industrial Production data at 9:15 AM ET. It showed a 0.5% increase in output at U.S. factories, mines and utilities. This was a bit stronger than the 0.3% that was expected, hinting at manufacturing strength. However, some components in the data that don’t make the headlines were more bond friendly than the overall change in output. Fortunately, the sales data carries much more importance in the markets than this report does. Traders are focused on the earlier release.

Next week begins with the stock and bond markets closed for the President’s Day holiday Monday. There are no major economic reports scheduled like we had this week, but there are a handful of moderately important releases the middle and latter days. In addition to the data there also is another Treasury auction and the release of the minutes from last month’s FOMC meeting set for Wednesday afternoon. What may end up having the biggest influence on the markets and mortgage pricing are tariff headlines and/or comments from the very large number of Fed-member speeches scheduled throughout the week. Look for details on all of next week’s activities in Sunday evening’s weekly preview.

 ©Mortgage Commentary 2025

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CMH - NMLS: 281811
8055 East Tufts Avenue, Suite 250 | Denver, CO 80237
(303) 500-3310  | Fax: (720) 306-4395 

CMH - NMLS: 281811
8055 East Tufts Avenue, Suite 250 | Denver, CO 80237
(303) 500-3310  | Fax: (720) 306-4395