Yesterday’s PCE numbers brought some additional implied inflation, but friendly central bank news in Japan and softer economic data in Europe helped improve bonds overnight. While Chicago PMI briefly pushed towards higher rates, buyers quickly regained control, and rates remain range-bound in the bigger picture. MBS closed up 25 bps, and stocks were up 34, showing a positive trend in the market. However, banks are currently facing rising deposit costs that may reduce lending and profits if those costs can’t be passed to borrowers. It’s estimated that a 4% lending reduction is possible based on prior rate hiking cycles, which could lead to a painful reduction in GDP growth of up to 0.4%. Stay informed and make informed decisions as a loan officer to better serve your clients in these changing times.

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