With continued progress toward a long-term U.S.–Iran peace agreement and reports that Iran has moved approximately 30 million barrels of oil back into global markets, financial markets are reacting in a rate-friendly manner.

Oil prices have softened, Treasury yields have moved lower, and Mortgage Bonds have improved as investors begin to price in reduced geopolitical risk and lower inflationary pressures.

This week, all eyes will be on the PCE (Personal Consumption Expenditures) inflation report, the Fed’s preferred measure of inflation and the benchmark used against its 2% inflation target.

Fed Chair Kevin Warsh has indicated an interest in exploring alternative inflation metrics, including real-time and trimmed-mean measurements, which many economists believe may provide a more accurate picture of underlying inflation trends.

For now, lower energy prices and easing global tensions are helping the bond market, and that’s generally a positive sign for mortgage rates.

As always, watch the bond market, not its tail. It tends to tell the story before everyone else sees it.

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