Economic indicators

Two policymakers have suggested they might support a cut at the July meeting, but most others have signaled they want more time to assess the impact of tariffs on inflation.

The Federal Reserve's preferred measure of inflation moved further from its 2% target, underscoring the central bank's reluctance to cut rates.

Consumer spending and exports fell slightly in the latest estimate, leading to a downward revision. Imports, which dragged down overall output during the first three months of the year, also came in smaller.

The impact of tariff policy on the mortgage-backed securities market is likely to surface first in the cost of new housing construction.

Independent monetary policymakers have resisted President Trump's call to lower financing costs but could find it harder to ignore employment losses.

While mortgage employment is lower year-over-year, the mixed bag of data makes it more likely that borrowing rates will remain higher for longer.

ABS overall should outperform, but risks remain in specific areas

A strong economy drove mortgage rates higher in the past week but it's still an advantageous market for consumers in some ways, according to Freddie Mac.

A Fannie Mae survey-high 86% of prospective buyers said it was a bad time to buy a home in May.

Mortgage lenders offered more cash-out refinance programs at a time when consumers might be coming to terms with the rate environment.

While the government-sponsored enterprise cut its origination forecast for this year, the Mortgage Bankers Association's updated forecast was unchanged from its October prediction.

High mortgage rates and the lack of inventory for sale pushed the sector into a downturn twice recently - between May and November last year and in May of 2023 - according to First American

Researchers at the government-sponsored enterprise also maintained their outlook for a modest recession but moved anticipated onset to the fourth quarter this year.

The American Bankers Association's credit conditions index remained near historic lows despite a slight uptick in the most recent quarter. Pessimism pervaded the outlook for both business and consumer lending.

A larger share of sellers were optimistic in May, but the percentage of enthusiastic buyers fell, according to Fannie Mae's Home Purchase Sentiment Index.

Economists lowered their projections for the consumer price index as well as the personal consumption expenditures price index for every quarter through the first half of 2024, according to the latest Bloomberg monthly survey.

The largest U.S. bank by assets raised its forecast for net interest income in 2023 to $81 billion from $74 billion, a positive sign for investors wondering how an economic downturn might weigh on profits.

The Pittsburgh bank posted a solid profit and said that it expects continued loan growth. But the pace of business expansion could slow alongside an economic downturn.

Bank of America is slowing hiring as fewer employees leave in an attempt to manage the company's headcount ahead of a possible U.S. recession, Chief Executive Brian Moynihan said.

Executives from PNC, Regions and M&T are expressing confidence that their loan books can withstand a recession. "We don't see crisis-type things in front of us right now," said PNC Chief Financial Officer Robert Reilly.