This past week, interest rates dipped again, driven by mixed economic news. Let's break down what happened and preview the week ahead.

"Don't stop believin' Hold on to that feelin'" Don't Stop Believin' by Journey

Israel-Iran Ceasefire

In a week packed with headlines, the reported ceasefire between Israel and Iran stood out. While the future remains uncertain, markets reacted positively, signaling potential stability. Oil prices, which spiked above $80 per barrel in just 24 hours, plummeted to the mid-$60s; a historic drop. The bond market, favoring lower oil prices, embraced this decline, boosting both stocks and bonds.

Fed Chair Powell Faces Pressure to Cut Rates

President Trump and his cabinet have long criticized the Federal Reserve's stance on interest rates, urging cuts amid low inflation and energy prices. Following the June 18th Fed meeting, dissent is growing among Fed members. Some now advocate for a rate cut at the July 30th meeting.

• Federal Reserve Vice Chair of Supervision, Michelle Bowman, expressed reduced concern about tariffs driving inflation and is open to a July rate cut if inflation remains contained.

• Fed Governor Christopher Waller noted that tariffs are unlikely to significantly boost inflation, supporting a potential rate cut next month.

• Chicago Fed President Austan Goolsbee remarked, "Somewhat surprisingly, the impact of tariffs has not been what people feared."

First Quarter GDP Finalized

The third and final reading of Q1 GDP came in at -0.5%, viewed as an outlier due to a massive trade deficit tied to anticipated tariffs. A recession requires two consecutive quarters of negative growth, but Q2 is projected to grow by nearly 3.00%. Most economists do not foresee a recession in 2025 or 2026.

30-Year Mortgage Rates

The 30-year fixed rate mortgage averaged 6.77% as of June 26, 2025, down from the previous week when it averaged 6.81%.

4.20% as a Key Level

The 10-year Treasury note yield has declined over the past month, reaching its lowest level since early April at 4.25%. Watch 4.20%; a threshold the yield has struggled to break consistently for over nine months.

Bottom Line: Uncertainty persists around tariffs and the forthcoming "Big, Beautiful Bill." However, the bond market has rallied for over a month, driving rates lower. Monitoring key levels could signal even lower rates in the weeks ahead.

Looking Ahead

Next week is shortened by the July 4th holiday. It's also Jobs Week, with labor market data in focus. Weak readings could strengthen calls for a July rate cut, amplifying dissenting Fed voices concerned about a slowing labor market.

For homebuyers and refinancers, mortgage rates are closely tied to mortgage bond prices. The chart below tracks the Fannie Mae 30-year 6.0% coupon. The rule is simple: rising bond prices mean lower mortgage rates, while falling prices push rates higher. Bond prices have risen over the past month and are poised to break above $101.50; a ceiling not significantly breached since October 2024.

Chart: Fannie Mae 30-Year 6.0% Coupon (Friday, June 27, 2025)