Member Services Desk Weekly Market Update

This MSD Weekly Market Update reflects information for the week ending August 15, 2025.

Economist Views

THIS WEEK'S ECONOMIC CALENDAR HIGHLIGHTS					UPCOMING WEEK'S US TREASURY AUCTIONS
Date Time	Event	Period	Survey	Prior	Bills	Offering Amount	Auction Date
8/19/25 8:30	Housing Starts	Jul	1295k	1321k	4-Week; 8-Week
8/19/25 8:30	Building Permits	Jul P	1390k	1393k	13-Week; 26-Week	82 Bln;73 Bln	8/18
8/19/25 8:30	Housing Starts MoM	Jul	-2%	4.6%	6-Week	85 Bln	8/19
8/19/25 8:30	Building Permits MoM	Jul P	-0.2%	-0.1%
8/20/25 7:00	MBA Mortgage Applications	15-Aug	--	10.9%	Notes	Offering Amount	Auction Date
8/21/25 8:30	Initial Jobless Claims	16-Aug	--	224k	No scheduled Note offerings.
8/21/25 8:30	Continuing Claims	9-Aug	--	1953k
8/21/25 10:00	Leading Index	Jul	0%	-0.3%	Bonds	Offering Amount	Auction Date
8/21/25 10:00	Existing Home Sales	Jul	3.92m	3.93m	20-Year	16 Bln	8/20
8/21/25 10:00	Existing Home Sales MoM	Jul	-0.30%	-2.7%	TIPS 29-Year 6-Month	8 Bln	8/21

The past week’s economic data was generally a “mixed bag” of positives and negatives. While the Consumer Price Index (CPI) report was widely considered tame enough to warrant a September Fed rate cut, the report contained numerous concerning elements. Among the more prominent concerns was the core reading’s 3.1% year-on-year gain, which is well above the Fed’s desired 2% target. Meanwhile, the surprising month-on-month .4% gain in services and .5% gain in the core ex-shelter reading have also spurred concern about brewing inflationary forces. This past spring’s inventory buildup has helped to somewhat contain tariff-induced price pressures, at least for the near-term, but pressures are still evident. The CPI report can be “sliced and diced” in numerous ways, but the takeaway is that inflation is not yet where the Fed wants it, and so prospects for a rate cut appear to rest highly on softer data from the jobs and growth front. Moreover, and seemingly validating the Fed’s wait-and-see posture, the Thursday morning release of a .9% July rise in the Producer Price Index (PPI) marked the largest increase in wholesale prices in three years. Note that there are both employment and inflation reports to come in September before the next FOMC meeting on September 17th.

The week ahead serves mostly second-tier data, including a number of housing-related measures. Demand challenges, driven by homeownership affordability issues, continue to pose an obstacle to the housing sector. Also, the Minutes from the July 30th FOMC will be released mid-week and should prove more interesting this time around, owing to the two dissents on the FOMC decision.

Housing Starts: Starts for July are expected to dip by 2% to 1295K from the prior month’s 1321K.

Building Permits: Permits are expected to decline modestly from the month prior.

Mortgage Applications: Applications this past week posted a sturdy rebound of 10.9%, driven mostly by refinancings. The drop in rates since the August 1st jobs report may continue to breathe a little bit of life into the sector.

Initial & Continuing Claims: Given the softness in the August 1st jobs report for July, these weekly numbers may provide a monitor for trends. Continuing Claims continue to trend at a higher level than earlier in the year.

Leading Index: The Conference Board’s Leading Economic Indicators index is expected to post a modest improvement to a flat reading.

Existing Home Sales: Another drop is expected in this measure, albeit milder than the month prior.

Federal Reserve Appearances:

• 8/20  11:00 a.m. – Governor Waller Speaks at Wyoming Blockchain Symposium. Note that Waller was one of the two dissenters at the July 30th FOMC.
• 8/20  2:00 p.m. – FOMC Meeting Minutes
• 8/20  3:00 p.m. – Fed’s Bostic participates in a moderated conversation on the economic outlook.

Key Market Trends

Sources: Federal Reserve. Released last week, the July 2025 Senior Loan Officer Opinion Survey on Bank Lending Practices (“SLOOS”) addressed changes in the standards and terms on, and demand for, bank loans to businesses and consumers over the period generally corresponding to Q2 2025. Regarding loans to businesses over the period, and seen here, respondents reported, on balance, tighter lending standards and weaker demand for commercial and industrial (C&I) loans to firms of all sizes. And the trend worsened slightly from the April SLOOS report. In other sectors, banks reported tighter standards and weaker demand for commercial real estate (CRE) loans, and they reported essentially unchanged lending standards and weaker demand for residential mortgage loans. Home equity lines of credit witnessed unchanged lending standards but stronger demand. For fuller results and an overview, visit https://www.federalreserve.gov/data/sloos/sloos-202507.htm.

Sources: Bloomberg. Top pane is yield (LHS, %); bottom pane is change (LHS, bps). As of Thursday afternoon, the UST term curve was modestly higher and steeper from the week prior, with yields up by 1 to 4 bps. As a consequence of the CPI report not being “scary enough to prevent a rate cut”, the market mid-week was “all-in” for a cut at the September 17th FOMC, but Thursday’s elevated PPI report slightly pared back the pricing of a 25-bps cut to ~87%. As mentioned in our Economics section, this week’s inflation reports contained several concerning elements. Also, there is another round of jobs and inflation reports prior to the next FOMC. Given this backdrop, a forthcoming cut is not a “slam dunk” as of this juncture. As of Thursday afternoon, the market priced end-2025 Fed Funds at 3.77%, or 5 bps higher than a week ago. The market’s end-2026 forward is ~3.05%, or 3 bps higher than a week ago.

Sources: Bloomberg. While admittedly not a major move, it appears that mortgage refinancings have at least staged a mini-resurrection from the virtually non-existent state of the past few years. Shown here are the 30-year mortgage rate (Gold, LHS, %) and the Mortgage Bankers Association Refinancing Index (White, RHS). The index rose a robust 23% in the week ending August 8th, surely assisted by the post-August 1st jobs report and subsequent decline in rates. After hovering near 7%, mortgage rates have declined to ~6.67%. Clearly, the backdrop is far from the first few years of the decade. But, as time ensues, an ever greater proportion of outstanding mortgages are struck at higher rates than the rock-bottom levels of 2020-2021. And this trend can gradually introduce a higher probability of potential refinancings and an overall increase in the negative convexity profile of mortgages and MBS.

Sources: Bloomberg. A contributing factor to the recent dip in mortgage rates has been tightening MBS spreads and historically low implied volatility (“vol”) levels. After a brief pop higher following the August 1st employment report, vol has again declined to the lowest levels of the past few years. Indeed, as seen here in the DGX Index (Deutsche Bank Gamma Index, Gold, RHS, annual bps), shorter-dated vol currently trades at the lowest levels since early-2022. And longer-dated vol currently trades at the lowest levels since early-2023, as seen here in the DVX Index (Deutsche Bank Vega Index, Green, RHS, annual bps). Note that this month’s simultaneous drop in both vol and rates serves to enhance the pricing of some of our option-based advance products, namely the Callable Advance (member owns the right to cancel the advance) and the Fixed-with-SOFR Cap Advance (member’s advance coupon can decline “1-for-1” if/when the cap strike is breached). Kindly call Member Services Desk to discuss and/or learn more about these products and their applications.

FHLBNY Advance Rates Observations

Front-End Rates

• As of Thursday midday, short-end rates were lower by 3 to 7 bps, with the 2-to-5-month zone leading the dip. The market’s more aggressive pricing of earlier Fed cuts assisted the drop. While robust Money Market Fund (MMF) AUM levels and negative net T-bill supply in the past few months had underpinned demand for short-end paper and benefited our funding spreads, the backdrop has shifted since the debt ceiling was raised via the budget bill signed on July 4th. Net T-bill supply has now turned decidedly positive, as Treasury rebuilds its General Account. A larger proportion of the fresh issuance has been front-loaded in the shorter 4- to 8-week maturity sector, and the net issuance is expected to remain positive through end-September. This change should serve to reduce liquidity in the financial system, and it has also led to some spread widening in our paper. MMFs, however, are absorbing sizable portions of the T-bill supply, as they have switched some of their substantial AUM from repo to T-bills and thereby contained any further severe impacts for bills and/or our paper. Indeed, this trend is already playing out, given the behavior in our paper.
• In an upcoming week mostly devoid of market-moving-type data, markets will latch onto any Fed comments or other news for direction.

Term Rates

• The longer-term curve, as of Thursday afternoon and generally mirroring the moves in USTs and swaps, was higher and steeper by 1 to 4 bps from the week prior. Kindly refer to the previous section for color on market dynamics and changes.
• On the UST term supply front, the upcoming week serves a 20-year nominal and a 10-year TIPS auction. Note that UST auctions usually occur at 1pm and can occasionally spur volatility around that time. Please contact the Member Services Desk for further information on market dynamics, rate levels, or products.