Quiet Week for Rates

At the time of writing this update on 7/11 Day, it is interesting to note that 7/11 is an iconic American brand that began in Dallas, TX, in 1927 and now has over 85,000 stores in 20 countries or territories. It is a wholly owned subsidiary of 7/11 Japan. Its name reflects its early change in business hours, from 7 a.m. to 11 p.m. Most importantly, since 2002, on 7/11 Day, you can stop by for a free Slurpee! Hope you were able to get yours! 

OBBBA Passes: Debt to Rise, Ceiling Lifted 

The week began with news of the weekend passage of the One Big Beautiful Bill Act (OBBBA). This was President Trump’s signature initiative. It was a massive bill crammed with many changes that are still being digested.  

The Congressional Budget Office (CBO) stated that the bill would significantly increase the national debt. Treasury Secretary Bessent noted that the CBO’s projections only accounted for our current level of economic growth and not for any increase in growth due to the policy changes in the bill. Time will tell.  

The level of debt is important to rates because as debt increases, more bonds are issued, increasing the supply relative to the demand and pushing rates higher. The bill did raise the debt ceiling, which averted the chance of a debt default, which would be terrible for rates. 

OBBBA Impact on Housing: Mixed News

Specifically pertaining to real estate in the bill, we saw a couple of items that are good for housing:   

1. The bill makes permanent the deduction for Mortgage Insurance, but it is limited by income level.  

2. It makes permanent the cap of $750K in mortgage interest that is able to be deducted.   

3. It extends the SALT (State and Local Tax) deduction until 2029 and increases it from $10K to $40K, but it is phased out for incomes over $500K. 

Tariff Updates and Geopolitical Risks

There was more tariff news from the White House:  

• Many countries were given extensions until August 1.  

• Threats of additional penalty tariffs on nations that join BRICS, an alternative world currency group that seeks to supplant the US dollar with another currency, with the prominent members being Brazil, Russia, India, and China.  

• There were also discussions about placing severe sanctions on Russia for its perceived failure to negotiate in good faith for peace.   

Fed Minutes Show Division; Jobless Claims Rise 

The economic releases were rather quiet this week, with the major releases being the Fed Minutes from the last meeting, Jobless Claims, and 10 and 30-year US Treasury auctions.  

• Both auctions were met with average or above-average demand. This caused rates to improve.  

• The Fed minutes showed a more divided board as to rate cuts. This was before the strong BLS Jobs report released last week.  

• Markets are pricing in no rate cuts until September and only two (2) cuts of 25bps for the year.  

• Continuing Jobless Claims was released and showed an increase to 1.97M. This is the highest since November of 2021 and shows that once people lose their jobs, it remains challenging to get a new one. 

Looking Ahead 

Next week, we get more inflation data from the Consumer Price Index (CPI) and Producer Price Index (PPI): 
 
Tuesday, July 15:  

• Consumer Price Index (CPI) 

Wednesday, July 16:  

• Producer Price Index (PPI) 

Thursday, July 17:  

• Retail Sales 

• Initial and Continuing Jobless Claims 

Friday, July 18:  

• Housing Starts 

• Building Permits 

• University of Michigan Consumer Sentiment