Rates Hit Fresh Lows

10-Year Treasury Falls Below 4% 

On Friday, the 10-year US Treasury significantly broke below 4.0% for the first time since October of 2025. At that point, there were only eight business days of a sub-4% yield. Prior to that,you would have to go back to September of 2024 to find yields that low.  

What does that mean for mortgage rates?  The 10-year US Treasury doesn’t change in lockstep with mortgage rates, but they generally follow each other. Mortgage rates can be estimated by adding a margin to the 10-year Treasury between 1.5-2.5%. This margin is called the yield spread. It has been shrinking lately, which is excellent news for mortgage rates. Coupled with a lower 10-year Treasury yield, this bodes well for mortgage rates continuing their downward trend. Let’s hope the yield stays under 4%. 

Fed Governor Waller Questions Jobs Data 

Earlier in the week, Federal Reserve (Fed) Governor Waller shared his thoughts on the BLS Jobs Report and the upcoming Fed meeting in March. He was a dissenter at the last meeting, having wanted another 25bps rate cut. He believes the January Jobs Report was inaccurate and will be revised lower. He pointed out that after revisions, the average monthly job growth for 2025 was only 15,000 jobs.  

He also stated that the QCEW revisions currently only run through March 2025 and will likely result in additional revisions for the remainder of the year, potentially pushing job numbers into negative territory. He confirmed that many Fed members appear focused on inflation being too high, though he believes underlying inflation is already at 2% once the effects of tariffs and the housing lag are removed. Despite his clear analysis, it seems likely that the Fed will not cut rates until the new Chairman, Kevin Warsh, takes the helm in June 2026.   

Case-Shiller and FHFA Show Modest Gains 

Home appreciation numbers came out this week from Case-Shiller and FHFA (Fannie Mae and Freddie Mac’s regulator). Case-Shiller showed home price appreciation of 0.4%, seasonally adjusted, in December. Following gains seen in October and November, this beat market expectations and presents good news for home values. 

The recent decline in interest rates likely played a role. FHFA reported that home prices rose 0.1% in December. FHFA draws their data from the Government Sponsored Enterprises(GSE’s/Fannie/Freddie).  That means it excludes cash buyers and jumbo loans. 

January PPI Shows Higher Wholesale Inflation 

The Producer Price Index (PPI), which measures wholesale inflation, was released for January.  It showed headline inflation rose 0.5%, more than the 0.3% expected. Core inflation, stripping out volatile food and energy prices, rose 0.8%-well above the 0.3% expected. Markets didn’t react negatively, as much of the gain appears to have come from Trade Services, the margins charged by retailers and wholesalers, which typically aren’t passed on to consumers. Excluding Trade Services, the rate was only 0.3%, which is in line with expectations. 

Looking Ahead: Upcoming Reports Highlight Busy Week 

Next week is busy with another BLS Jobs Report coming out on Friday: 

Monday, March 2: ISM Manufacturing Index 

Wednesday, March 4: ISM Non-Manufacturing Index 

Thursday, March 5: Unit Labor Cost and Productivity, Initial and Continuing Claims 

Friday, March 6: BLS Non-Farm Payrolls (Jobs Report), Retail Sales