Good Morning!
Hope you had a wonderful weekend! I finally kicked this cold this weekend. We took the kids to our favorite Mexican spot in Platt Park, Uno Mas. Turns out that when you treat the employees well and get to know them, they give you 10% discounts now!
My parents offered to take the kids on Saturday and my wife and I quickly accepted that offer. We realized we hadn’t had a Saturday at home without the kids since they were born. While we missed spending the day with them, we went back to our old ways. We hit up our all-time favorite Mexican spot, Pinche Tacos (my wife calls me “Salsa Boy” for a reason). Also know as Tacos Tequila Whiskey, Pinches was first a Taco Truck but opened up their first restaurant on Colfax and York. That one has now been closed due to the Colfax construction debacle. The only one left is in the Highlands on 32nd and Lowell. We sat at the bar and met the “New Owner” Steve. The place was packed at 3:00 and the food was amazing. He is doing a great job after taking over 4 months ago. Go give it a try. I promise you won’t regret it. If you like Tacos and Margs, then this place is for you. Just be sure to get the “Purist” Margarita and tell Steve I sent you!
We also watched a few movies. I’d have to say that Bugonia has been my favorite Oscar Nominee thus far. I’m a huge Timothée Chalamet too, so that’s saying a lot.
Overall, this week is a lighter news week with he most important data releases being the Conference Board’s Consumer Confidence survey (Tuesday) and PPI (Friday). Other key economic releases will include the Chicago Fed’s National Activity Index (Monday), the FHFA & Case-Shiller home price indexes (Tuesday), and November and December Construction Spending data (Friday).
Have a wonderful week ahead!
1 Year Look at the 10 YR Yield:
Last Month’s Market Commentary:
**December’s** PCE Inflation Runs Hotter Than Expected
- December Personal Consumption Expenditures (PCE) data came in slightly above forecasts. Headline inflation rose 0.4% for the month, lifting the annual rate to 2.9%.
- Core PCE, which excludes food and energy and is the Fed’s preferred inflation measure, also increased 0.4%, bringing the annual core rate to 3.0%.
- One notable contributor: video streaming services, which surged 19.5% in December, adding to monthly price pressures.
- The Federal Reserve continues to walk a tightrope. Inflation remains above the 2% target, supporting a cautious stance on further rate cuts, while signs of labor market cooling could increase pressure to ease. Chair Jerome Powell has reiterated there is “no risk-free path.”
- Looking ahead, annual inflation could improve in the coming months as higher readings from early 2025 roll off the 12-month calculation — assuming new monthly data remains moderate.
Winter Weather Slows Contract Activity
- Pending Home Sales — which track signed contracts on existing homes — slipped 0.8% from December to January and were 0.4% lower than a year ago. Winter storms likely dampened activity in the South and Northeast, while the West and Midwest posted modest gains
- In contrast, contracts on new homes reached their strongest levels in nearly four years late last fall, highlighting a split between resale and new construction activity.
- According to the National Association of REALTORS® Chief Economist Lawrence Yun, lower mortgage rates could bring as many as 550,000 additional buyers into the market this year. The key question: will supply keep up? If inventory fails to expand meaningfully, renewed demand could place upward pressure on home prices.
GDP Slows, Labor Market Mixed
- The first estimate of Q4 2025 GDP showed the U.S. economy growing at an annualized rate of 1.4%, a sharp slowdown from 4.4% in Q3. Much of the decline was tied to reduced government spending during the shutdown.
- On the labor front, initial jobless claims fell by 23,000 to 206,000 last week. However, the drop may reflect temporary distortions from holiday travel around Valentine’s Day and Presidents Day, which can delay filings.
- Meanwhile, continuing claims rose by 17,000 to 1.869 million, and have remained elevated, a sign that unemployed workers are taking longer to secure new jobs.
- Economic growth is clearly cooling, and while layoffs remain limited, hiring momentum appears sluggish beneath the surface.
The Relationship Between the 10 Year Yield and Mortgage Spreads & 30 YR Fixed Mortgage Rates
Current Spread of 10 YR Treasury to 30 YR Fixed Rates increased from 1.91% last week to 1.94% today. We are almost back to the long-term average of 1.50% – 1.80%.
With a lower 10 YR yield (and with less volatility) and better spreads, I am showing the approximate ranges for mortgage rates FOR PURCHASES based on the 10 YR yield (picture is from 2/2/2026).
Due to Fannie/Freddie LLPA’s, rates on refinances are about .125-.250%, higher on average, than purchases.
Long-Term Mortgage Spread Chart (1970-2025):
This Week’s Economic Data & Reports:
- MON – Fed’s Waller Speech, Chicago Fed National Activity, Factory Orders
- TUES – ADP Employment Weekly, CB Consumer Confidence, Case-Shiller Home Price Index, FHFA House Price Index, 2-Year Note Auction, Fed Member Speeches
- WED – MBA Mortgage Applications, 5-Year Note Auction, Fed Member Speeches
- THURS – Jobless Claims, 7-Year Note Auction
- FRI – PPI (Producer Price Index), Chicago PMI
People have asked where to track this stuff daily so here is the Bloomberg Website where you can see the reports/data:
https://www.bloomberg.com/markets/economic-calendar
Thanks for reading and have a great day!
