This past week, interest rates remained stable following the release of the minutes from the recent Federal Reserve meeting. Let’s review key insights from the minutes and look ahead to the coming week.

Fed Minutes from March Meeting

Three weeks after each Federal Reserve meeting, the minutes are released, offering insight into the discussions and perspectives of Fed officials. On Wednesday, the minutes from the early May meeting were published.

Key takeaways include:

• Fed officials noted heightened economic uncertainty, primarily due to potential tariffs. They emphasized a “wait-and-see” approach to evaluate the impact of trade policies.
• Concerns were raised about persistent inflation exceeding the Fed’s 2% target. The risk of higher inflation, potentially worsened by tariffs, supports the Fed’s cautious stance.
• Despite increased risks of economic slowdown, the economy continues to expand at a solid pace, demonstrating resilience.
• The Fed is prepared to keep rates “higher for longer” if inflation persists. However, if unemployment rises, they are ready to shift toward easing rates.

Consumer Confidence Surges

Consumer confidence saw its largest increase in four years, driven by optimism following the delay in tariffs. This positive reading comes after five consecutive months of declines. This reading highlights how fast consumer sentiment can change upon some uncertainty being lifted.

Japanese Bonds

The bond market is global so as rates tick higher abroad, it places upwards pressure on rates here. The opposite is true. On Sunday, Japan announced it might reduce the issuance of long-term bonds due to waning demand. Lower demand means Japan would need to offer higher interest rates to sell these bonds. This was evident on Tuesday when Japan auctioned 40-year bonds, with weak buying interest forcing higher yields to clear the debt.

US Treasury Auctions

Here at home the Treasury Department sold $183B in new debt and the buying appetite was very good. The caveat? The debt was short-term notes in 3, 5 and 7 years. The markets are more focused on the longer-term auctions of 10-yr Notes, 20 and 30-yr Bonds as those issues carry more risk.

4.50%

The 10-year Treasury note remains a key indicator for mortgage rates, currently striving to stay below 4.50%. If it holds below this level, we may see some relief in mortgage rates in the coming weeks and months. However, if the 10-year note rises above 4.50%, it could climb toward the 2025 high of 4.80%, potentially pushing mortgage rates higher.

Bottom Line: Uncertainty remains high, bringing increased volatility. This is why we’re seeing interest rates fluctuate with news related to tariffs and fiscal policy. This trend will likely continue until we see more clarity.

Looking Ahead

Next week the major focus will be on the employment side of the Fed’s dual mandate of “maintaining price stability and promoting maximum employment”. We will see the JOLTS reports which tell us how many Jobs are available as well as quit and hire ratios. And come Friday will be the all-important Jobs report for May, where 130,00 jobs are expected to be created.

Mortgage Market Guide Candlestick Chart

For homebuyers and refinancers, mortgage rates are critical and closely tied to mortgage bond prices. The chart below tracks the Fannie Mae 30-year 6.0% coupon. The rule is straightforward: rising bond prices lead to lower mortgage rates, while falling prices drive rates higher. The right side of the chart shows prices have bounced higher from the lows of the month; helping rates modestly improve. Let’s hope prices remain above $100.50, otherwise rates will tick higher again.

Chart: Fannie Mae 30-Year 6.0% Coupon (Friday, May 30, 2025)