Rates increase on Iran news

Happy Friday from Local Mortgage!

After rates hit their lowest point since November of 2022 at 5.5% last Friday, this week reminded us how quickly world events can shift markets and investor sentiment. Rates moved up dramatically this week, all the way back to 5.875% for our best 30-year fixed conventional scenario.

After last weekend’s developments in Iran, investors are concerned that an increase in oil prices will spike inflation. In addition, if additional military spending requires the issuance of more treasury bonds, yields would most certainly rise. I think the effects stemming from this military operation, (if that is what we are still calling it today), will depend on how long it lasts and to how much money is spent.

In economic news, Friday’s key employment report showed more weakness in the labor markets as we lost 92,000 jobs in February, well below the anticipated forecast of 50,000 jobs added. This big of miss would have normally caused a bigger rally for bonds, but some of the miss was distorted by healthcare strikes. The unemployment rate moved from 4.3 up to 4.4%.

In contrast to the labor market weakness, two significant reports from the Institute of Supply Management showed stronger than expected results. Both the ISM national services sector and the manufacturing sector both showed signs of expansion. While tariff policies may change after the recent Supreme Court ruling, some analysts point to the higher tariffs imposed last year on foreign goods as a reason we are seeing an increase in domestic manufacturing.

Next week, attention will remain on the middle east as well as two major inflation reports with the CPI on Wednesday and the PCE on Friday.

Hope everyone has a great weekend and thanks for reading.