Member Services Desk Weekly Market Update

This MSD Weekly Market Update reflects information for the week ending September 19, 2025.

Economist Views

THIS WEEK'S ECONOMIC CALENDAR HIGHLIGHTS
Date Time	Event	Period	Survey	Prior
9/23/25 9:45	S&P Global US Manufacturing PMI	Sep P	--	53.00
9/24/25 10:00	New Home Sales	Aug	655k	652k
9/24/2025	Building Permits	Aug F	--	1,312k
9/25/25 8:30	GDP Annualized QoQ	2Q T	3.30%	3.30%
9/25/25 8:30	Durable Goods Orders	Aug P	0.80%	-2.80%
9/25/25 8:30	Initial Jobless Claims	20-Sep	--	231k
9/25/25 8:30	Continuing Claims	13-Sep	--	1,920k
9/25/25 10:00	Existing Home Sales	Aug	3.98m	4.01m
9/26/25 8:30	Personal Income	Aug	0.30%	0.40%
9/26/25 8:30	Personal Spending	Aug	0.50%	0.50%

The main event of the past week was the FOMC meeting and its, as expected, rate cut of 25 bps. The Fed’s decision clearly rested on labor market dynamics, as Chairman Powell declared in his press conference that “risks to the labor market were the focus of today’s decision”. Please refer herein for further details on the FOMC outcome. Economic data released this past week was mixed, with manufacturing and housing-related data on the weak side but retail sales stronger than expected. The retail sales figures may have been artificially boosted to a degree by underlying inflation pressures, but the data reflected a consumer sector that, at least in aggregate, remains sturdy.

The upcoming week serves a busy data slate. While much of the data is second-tier variety, the end-of-week release of the latest PCE Price Indices could be notable, given their standing as a favored Fed barometer for measuring inflation pressures. Without stronger-than-expected inflation data or a major reversal in labor market momentum, another rate cut or two appears likely this year.

New Home Sales & Building Permits: Both released on the same morning, the former is expected to post a slight rise and the latter a slight decline. The permits figure should prove more interesting, since it is more of a forward-looking indicator for activity.  

GDP Annualized QoQ: The previous forecast for Q2 GDP was 3.3%, and current estimates indicate the same 3.3% for this update.

Durable Goods Orders: The August estimate is a rise of .8%, which would improve on the previous month’s 2.8% decline. 

Initial and Continuing Jobless Claims: Initial Claims dropped last week by 22K to 231K; however, the 4-week moving average for Initial Claims remains higher at 240K. Continuing Claims dropped by 19K to 1,920K. Overall, the data assuaged concerns of an ongoing or steep rising trend, given the prior week’s notable 263K rise in initial claims. This data set will continue to be monitored closely.

Existing Home Sales:  Sales are expected to post a dip for August, thereby re-establishing this year’s downward trend. While recent lower rate levels have boosted refinancings (see information in a following chart), purchase activity has lagged due to ongoing affordability constraints.    

Personal Income and Personal Spending: The income estimate for August is expected to be slightly lower than July’s .3%, while spending is forecasted to again post a .5% rise. The past week’s retail sales data revealed that spending is “hanging in,” although recent data indicates that financially “well-off” households are predominantly supporting and boosting the aggregate figures.  

 Federal Reserve Bank Appearances:

• 9/22/2025 9:45    Fed's Williams Speaks on Monetary Policy Panel
• 9/22/2025 10:00  Fed's Musalem Speaks of Economic Outlook and Monetary Policy
• 9/22/2025 12:00  Fed's Hammack Speaks on Reserve Banks and the Economy
• 9/22/2025 12:00  Fed's Barkin Speaks at Howard Co Chamber
• 9/24/2025 16:10  Fed's Daly Gives Keynote Remarks on Monetary Policy
• 9/25/2025 9:00    Fed's Williams Gives Welcoming Remarks at US Dollar Conference
• 9/25/2025 13:00  Fed's Barr Speaks on Bank Stress Testing

UPCOMING WEEK'S US TREASURY AUCTIONS
Bills	Offering Amount	Auction Date
4-Week; 8-Week	100 Bln; 85 Bln	9/25
13-Week; 26-Week	82 Bln; 73 Bln	9/22
6-Week	85 Bln	9/23
Notes	Offering Amount	Auction Date
2-Year; 5-Year	69 Bln; 70 Bln	9/23; 9/24
7-Year	44 Bln	9/25
FRNs	Offering Amount	Auction Date
1-Year 10-Month	28 Bln	9/24

Key Market Trends

Sources: Bloomberg, Federal Reserve Bank of New York. A tandem of New York-area “soft data” reports released this past week portrayed weakening conditions. The NY Fed’s Business Leaders Survey, a monthly survey of service firms in NY State, northern New Jersey, and southwestern Connecticut, revealed that business activity declined significantly in its early-September canvass. The headline index (White, RHS, diffusion index) fell eight points to -19.4, its lowest reading in several months, while the business climate index remained negative at -40.7, thereby suggesting the business climate remained worse than normal. Employment edged lower, wage growth remained modest, and input and sales price increases remained elevated but relatively unchanged from last month.  Moreover, the outlook for the future remained in pessimistic territory. On the manufacturing front, the NY Fed’s Empire survey index (Green, LHS, diffusion index) posted a modest decline into negative territory for the first time since June. Relevant to the Fed’s decision-making, current and future employment metrics were flat, thereby indicating a low-hiring labor market climate.

Source: FHLBNY. Here is a Thursday afternoon snapshot of the curve out to 3-year and the market’s pricing of prospective Fed rate cuts, along with the Fed’s fresh median year-end rate projections from the FOMC Summary of Economic Projections, aka “dot plot”. As mentioned last week, the Fed dots were likely to inch a bit closer to the market’s forward curve. Indeed, the dots for each of 2025, 2026, and 2027 declined by 25 bps. Still, the market prices for a faster pace of cuts, as evidenced here in 2026. There was wide dispersion in the dots, and the newest FOMC voter proved to be an outlier to the low side of the dots, especially for this year. The Fed is essentially in a precautionary mode, and Chair Powell dubbed the 25-bps cut as a “risk management cut” since “job gains have slowed, downside employment risks have risen”; hence the Fed looked past recent elevated inflation measures to make the rate adjustment. Powell also clearly noted that there was not widespread support at all for a 50-bps cut. Some strategists have termed the current economic backdrop as “stagflation-lite”; in this regard, the Fed will monitor conditions meeting-by-meeting at this stage.

Source: 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 a week ago, with the 2/3/5/10-year rising by ~2/6/7/8 bps. The move mostly occurred after the FOMC outcome, as bond markets consolidated after the declining trend of recent weeks. As of Thursday afternoon, the market priced end-2025 Fed Funds at 3.635%, or 1 bps higher than a week ago. The market’s end-2026 forward is ~2.915%, or 5 bps higher than a week ago.

Source: Bloomberg. In recent editions, we covered trends in mortgage market dynamics and an improving backdrop for mortgage production. Indeed, this past week witnessed a notable spike in the Mortgage Bankers Association (MBA) Weekly Market Index. The bulk of the move was due to refinancings. As seen here, the MBA Refi Index (White bars, RHS) posted its biggest weekly increase in ~3.5 years. Naturally, the recent decline in mortgage rates (Gold, LHS, %) precipitated the move. Mortgage rates have benefited from tighter mortgage spreads in MBS and a decline in implied volatility measures to the lowest levels in over three years, as covered in our previous edition. Moreover, as time has ensued and mortgages were struck at higher rates than the early 2020s, a greater subset of the mortgage universe has become eligible to refinance.

FHLBNY Advance Rates Observations

Front-End Rates

• As of mid-morning Thursday, short-end rates were lower than a week ago, with the shortest tenors leading the move because of the Fed’s rate cut. Overnight, which had spiked on Monday due to the impact on SOFR from the corporate tax date and UST settlements, subsequently subsided, and, with the Fed rate cut, was 30 bps lower than the week prior. In the days leading into the 25th, GSE funds should enter the market before being removed to pay MBS holders, and this inflow should help quell upward pressures on overnight financing rates.  Strong demand, meanwhile, for short-end paper has helped to tighten our funding spreads, and Money Market AUM remains robust. Net T-bill issuance should moderate over the coming weeks, as the September 15th tax date infused the Treasury with funds. Also, the bulk of the heavy net issuance of the past few months is likely in the rearview mirror now that the Treasury has significantly rebuilt its General Account.
• The markets will monitor economic data and any Fed commentary in the aftermath of the past week’s meeting.

Term Rates

• The longer-term curve, as of Thursday afternoon and generally mirroring the moves in USTs and swaps, was higher and steeper than it was a week ago. While the 2-year rose by 3 bps, the 5- and 10-year increased by 8 and 9 bps, respectively. Kindly refer to the previous section for color on market dynamics and changes.
• On the UST term supply front, the upcoming week serves 2/5/7-year auctions, all to settle on the 30th. 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.