It was a head-scratcher of a week in the mortgage market—one where the headlines said “good news,” but the bond market didn’t get the memo. Inflation data came in softer than expected (yay!), but rates still ended up higher (wait, what?). So let’s break it down.
📉 Inflation Eases, But Rates Rise
The big headline? Inflation cooled off. Both the Consumer Price Index (CPI) and Producer Price Index (PPI) showed much softer readings than economists were forecasting.
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Core CPI (which strips out food and energy) rose just 2.8% year-over-year in March—the lowest since March 2021 and well below predictions.
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Core PPI (which tracks producer costs) actually dipped 0.1% from January, despite expectations for an increase.
These numbers suggest inflation is continuing to trend down from its 2022 highs, which is typically great news for mortgage rates. So why did bond yields (and by extension, mortgage rates) shoot up at the end of the week?
📦 Tariffs, China, and Market Jitters
Midweek, President Trump announced a 90-day pause on tariff hikes for most countries—except for China, where tariffs will increase significantly. That announcement rattled markets.
Investors started to speculate about whether China might retaliate by selling off U.S. bonds. Since China and Japan are the top two holders of U.S. mortgage-backed securities, that kind of move could definitely cause turbulence.
There’s also chatter that some investment firms are being forced to sell bonds to raise cash after recent stock market losses. Add in foreign investors backing off due to uncertainty, and it’s a perfect storm pushing bond yields higher—even in the face of calming inflation data.
🏠 Shelter Costs Still Stubborn
Even though inflation is easing overall, housing continues to play the villain. Shelter costs remain one of the biggest contributors to sticky inflation. While airline fares, used car prices, and even prescription drug costs dropped in March, rent and housing prices haven't cooled at the same pace—keeping overall inflation above the Fed’s 2% target.
👀 What to Watch Going Forward
Markets will be closely watching how these new tariffs play out. If they lead to higher prices on goods, that could push inflation back up and impact mortgage rates again.
For now, we’re seeing an unusual moment: inflation is slowing, but rates are rising, driven more by market sentiment and geopolitical uncertainty than by the economic data itself.
Want to talk through what this means for your buying or selling plans? I’ve got you. Let’s make sense of this market together.
📩 Call Me —I’m here to help.
