Mortgage rates take cover as inflation fears explode 🫣💥📈
Midweek Market Update
Included in this update are the following sections:
MIDWEEK RECAP ⏪
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After “Freddie Mac Friday” stirred up a palpable euphoria, promoters of so-called “lowest rates since 2022” have been left with a Shaq sized foot in the mouth after the weekend military operation on Iran stunned the world and bond markets.
As I shared over the weekend, the Freddie Mac data is about as accurate a gauge of mortgage rates as a wet finger in the air is for determining the weather.
Regular readers of the Weekly Kut know how quickly the PRICE of mortgage rates can change, and for anyone not yet initiated the first two days of the week were baptism by fire.
After nearly two weeks of hovering near record lows without a ripple of volatility, the price of mortgage rates has jumped 30-bps since the Friday close (see Rate Price Index section).
Manufacturing data earlier in the week added to inflation concerns, which further stoked the bond sell-off.
However, despite a similar “hot” reading today in service sector surveys (PMI), bonds shrugged it off in what could be a shift of focus back to Friday’s critical NFP employment report.
Oil prices are also being monitored closely.
Having already risen 12% from the December lows, the unfolding events in the middle east skyrocketed the price by another dozen percent in just a few days.
Another reason bonds are quiet today is oil prices seem to be stabilizing at technical levels near $75 a barrel.
IMPACT CALENDAR 📅
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The price of oil will continue to be a key factor in how markets are pricing inflation risks, as control of the Hormuz Canal is critical to keeping crude supply stable.
Meanwhile, markets seem to be shifting their focus towards Friday’s Non-Farm Payroll employment report.
Since the 2025 August NFP first sparked the ongoing bond bull market, mortgage rate observers watch optimistically each month for another sign that the economy is faltering.
However, if today’s slightly hotter than expected ADP payroll data is more signal than noise, we should curb our enthusiasm for Friday.
RATE PRICE INDEX 📉
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Mortgage rates do not rise or fall, instead the PRICE of rates change.
The LendZen Index calculates a daily change in the price of mortgage rates by tracking a spectrum of mortgage-backed securities (MBS).
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24-Hour: +2 bps ($20 per $100K)
5-Day: -5 bps (-$45)
10-Day: -30 bps (-$294)
30-Day: -40 bps (-$395)
Learn more about the LendZen Index and explore the full data series at LendZen.substack.com
MORTGAGE SPREADS 🧈
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Published daily with the LendZen Index is the LendZen Mortgage-Treasury Spread.
The LMTS uses actual bond yields to create a historically consistent, and reliable, data set.
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Feb 25: 0.84
Mar 4: 0.88
24h: -5 bps
5d: +4 bps
12m Avg: 1.14
YoY: -39 bps
Learn more about the importance of accurate mortgage spreads on this Substack post.
The spread between MBS yields and the 10-Treasury Note has been widening but bounced back today below 90-bps.
RATE LOCK GUIDE 🔒
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The LendZen LOCK-O-METER provides borrowers with a risk-weighted score based on how various macroeconomic events, including market data, central bank announcements, and geopolitics, each historically impacts the price of bonds.
higher risk scores = lean towards locking
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Closing Window
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[ 15 Days ] — 85 🔴
The sudden 30+ bps price reversal combined with geopolitical uncertainty and Friday’s NFP employment report creates elevated near-term risks. Locking protects against further headline-driven bond weakness.
[ 30 Days ] — 64 🟠
Oil-driven inflation fears and the rapid repricing in bonds are creating a more lock focused environment. The next few weeks will be shaped by the “Big 3” and ongoing inflation risks.
[ 45 Days ] — 55 🟡
While recent volatility is worthy of floating anxiety, markets have time to absorb the recent geopolitical shocks and recalibrate around econ data – that is, as long as “Operation Epic Fury” isn’t an epic failure.
[ 60 Days ] — 38 🟢
The longer-term bond-friendly macro trend remains intact with the 30-day rate price trend back to unchanged, but geopolitical energy shocks introduce enough uncertainty to push risk slightly higher than last week’s lock scores.
Thanks for reading.
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