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ast week's bond auction was perceived as having soft demand, sparking concerns about the US's fiscal discipline and potential consequences. However, by the end of the week, bond yields rallied, and mortgage rates decreased on Friday, overshadowing the debt and deficit story.

    In my 2025 forecast, I predicted mortgage rates to range between 5.75% and 7.25%, with the 10-year yield fluctuating between 3.80% and 4.70%. If the bond market is genuinely concerned about debt and deficits, it's puzzling that the 10-year yield was significantly higher in the 1990s when debt levels were lower.

    Federal Reserve policy still accounts for 65-75% of where the 10-year yield and mortgage rates range within an economic cycle. Assuming no recession scare, a normal range for the 10-year yield is between 4.35% and 4.70%. However, if economic data deteriorates, we could see the range shift lower.

    Mortgage spreads have improved since their peak in 2023 but remain elevated. If they returned to their normal range, mortgage rates would be 0.76-0.56% lower than today's level.

    Purchase application data increased by 13% year-over-year last week, down 5% weekly. Historically, this data is positive during the seasonal heat months, and we've seen a positive trend in 2025 with 16 straight weeks of positive year-over-year data.

    Total pending sales are slightly higher than last year, despite elevated rates in 2025. Weekly pending sales have been steadily increasing, with some year-over-year growth.

    The housing market is seeing an increase in inventory, which is much needed to return to pre-pandemic levels for the market to operate effectively. New listings data has finally returned above 80,000 during the seasonal peak months, and price-cut percentages are higher than last year, reinforcing a cautious growth forecast for 2025.

    This week's economic data includes key PCE inflation figures, home price data points, pending home sales, and jobless claims. We may be at the mercy of crazy headlines and wild moves in the bond market, so let's see what the trade war brings us.