Market Commentary

November 08, 2024

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The Federal Reserve has dropped its overnight borrowing rate by 25 basis points.

With results from the presidential election in, and the return of Donald Trump to the White House confirmed, the Fed moved ahead with a widely anticipated 25 bp cut in the Fed Funds target rate. The 25 bp reduction, which was predicted with a 95%+ probability, places the Fed Funds target rate at 4.50% – 4.75%, down 75 bps since September. Anemic job growth and tame inflation figures prompted the Fed’s move. As inflation marches steadily toward target levels and concerns over job growth increase, the Fed is expected to continue to reduce rates, although the amount and pace of future reductions is uncertain. The CME Fed Watch tool indicates the probability of a 25 bp rate cut at 71% and of a 50 bp rate cut at less than 1% at the next meeting in December.

4.33% 10-Year Treasury yield following the election and Federal Reserve rate drop announcement

Equity markets rallied the day after the election while the bond market sold off, driving treasury yields higher and reflecting concerns over government spending that could increase deficits.

5.75% – 6.50% Fixed rates for most loans

The September rate drop provided a boost to fixed rate financing demand as borrowers rushed to lock rates. The subsequent increase in Treasuries has led to a noticeable slowdown as lenders adjust borrowing costs on applications where rates were not locked in. Many borrowers who missed the short financing window and can afford to wait are doing just that, while others are unable to finance out existing debt at current rates. Despite the increase in rates, there is ample liquidity in the market and most lenders are eager to close new loans.

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