03/16/2026
MARKET UPDATE - March 16, 2026 💹
Market Overview:
The bond markets are slightly better this morning, with the yield on the 10-year Treasury declining to 4.228% this morning, down from the high of 4.289% on Friday. The top issue in the markets continues to be the Iran conflict and how this will impact oil prices, inflation rates, and interest rates.
The Fed is having their normally scheduled FOMC meeting this week and the markets do not expect any change in the Fed Funds rate when the Fed holds their press conference at 2:00 PM ET on Wednesday. The current Fed Funds rate is 3.50%, which is considered “restrictive” meaning that it is intentionally trying to slow the economy. The Fed Futures market is presently predicting one Fed cut to happen by the end of this year.
This is a relatively quiet week with respect to scheduled economic reports. Today we saw the February report for Industrial Production, with a 0.2% increase for the month, above the market’s prediction of a 0.1% increase, but below the January report of 0.7%. This was encouraging for the economy to see a gentle increase in domestic manufacturing, but this is not the top focus of the markets, which are more concerned with oil prices and inflation.
Tomorrow’s start of the two-day Fed meeting is not expected to have any surprises in the Fed’s normal Wednesday press conference that would impact mortgage rates. On Wednesday we will see the Producer Price Index for machine manufacturing and the January Factory Orders report, expected to show a 0.1% increase after December’s 0.7% decline. These reports will provide the markets with insights to the health of domestic manufacturing, but this is not currently a top bond market focus.
On Thursday we will see the weekly jobless claims report, expected to show 215,000 new claims filed, up from the 213,000 the prior week, and we will also see the Philadelphia Fed survey of businesses within their Fed district, expected to show an index of 10.0 down from 16.3 in February. Also, new home sales will come out on Thursday with the markets expecting to see 720,000 new homes sold in January, down from the 745,000 in December.
None of this week’s scheduled reports are expected to have any impact on bond prices or interest rates. The top market focus will continue to be the conflict with Iran and how this is impacting oil prices and interest rates.
The yield on the 10-year Treasury bond is presently 4.228%, down from its previous high of 4.289% last Friday. Below is the 5-day chart of the yield on the 10-year Treasury bond.
Market Details:
Iran Conflict. The Iran conflict is entering its third week, with multiple sources indicating that combat will likely continue for at least 3-5 more weeks. Overnight Iranian drone attacks temporarily shut down Dubai International airport and hit a key oil facility in the United Arab Emirates.
Oil Prices. The price of West Texas Intermediate crude oil is presently $94.22 which is down from its high of $98.74 earlier today, as a result of Treasury Secretary Scott Bessent stating that the U.S. would allow some Iranian fuel tankers to transit through the Strait of Hormuz. There were reports this weekend that that fuel tankers registered to India and China also passed through the strait this weekend, which also helped push world oil prices lower this morning.
How Oil Prices Impact Interest Rates. Increased oil prices increase the cost of goods for consumers and businesses, pushing up inflation in the economy. Increased fuel costs have a direct impact on the cost to produce and ship goods, which creates an upwards inflationary pressure.
When crude oil is refined, in addition to creating gasoline, diesel, jet fuel and lubricants, many other biproducts are created that are used to manufacture fertilizers, batteries, detergents, medications, plastics, and thousands of other consumer goods.
Increased oil prices increase the input materials cost, the cost of production processes and the shipping costs of finished goods. Increased oil prices also reduce consumer and business spending due to higher costs for fuel at the gas pump, leaving less discretionary income. The net impact is higher inflation pressures and reduced economic activity.
Impact to Mortgage Rates. Mortgage rates are driven primarily by daily changes to the yield on the 10-year Treasury bond. Mortgage rates are based upon a “spread” to the yield on the Treasury bond, because mortgage loans will have uncertain future principal prepayment patterns, compared to the certain timing of future principal payments on Treasury bonds.
Investors in Ginnie Mae, Fannie Mae or Freddie Mac MBS own high-quality, long-term bonds backed by the full faith and guaranty of the U.S. government, so these are high quality investments similar to investing in U.S. Treasury bonds. The key difference is the uncertainty in when a mortgage loan will be paid off, which is why there is a daily spread between the yield of a Treasury bond and the rate of a mortgage.
Iran Conflict Impact On Interest Rates. The 10-year Treasury is under two key opposing price pressures as a result of the Iran conflict.
The first is when worldwide tensions increase, investors seek to sell their riskier investments and increase their holding of “safe haven” assets such as gold or U.S. Treasury bonds, which are considered the safest bond investments in the world. This creates an upward price pressure on Treasury bonds and a downward pressure on bond yields or interest rates.
The opposing pressure in the Iran conflict is the increased price of oil, which drives up inflation rates, and if these are sustained increases over the long term, this will drive up all long-term interest rates. Long term bond investors simply want to earn a net return on their investment above the expected future rate of inflation. If the markets think inflation rates will be 50 basis points higher than previously assumed, all long-term interest rates will rise by 50 basis points.
Where do we go from here? A key question is how long Iran will be able to threaten shipping in the Straits of Hormuz, through which approximately 20 percent of the world’s oil and LNG gas supplies transit.
If Iran’s ability to project military force into the gulf is eliminated due to the daily bombing attacks, or if there is an overthrow of the current Iranian regime by their own people, either scenario would allow oil tankers to safely transit the gulf and oil prices would quickly drop to their pre-conflict levels, inflation worries would subside, and mortgage rates would decline.
However, if Iran’s military is able to survive the current conflict and continues to be able to project force into the gulf, and/or the current Iranian government is not overthrown by their own citizens, then oil prices would remain elevated for a while, and mortgage rates would likely be higher for a longer time period.
This Week’s Reports:
There are no key scheduled reports this week that will provide insights into the bond market’s top concerns, so there is a very low probability that we will surprise changes in mortgage rates this week due to scheduled reports. Any surprise changes in the Iran conflict will be the likely drivers of surprise daily mortgage rate changes. A decrease in tensions will lower rates and an increase would do the opposite.
*This Market Update and similar such communications are for informational purposes only and are based on publicly available information. These materials are general communications, which are not impartial, and are provided solely for discussion purposes, and not in connection with any product or service offering. The opinions and views expressed in this Market Update are as of the date of this communication and are subject to change. Any forward-looking views and statements contained in this Market Update are based on current estimates or expectations of future events or results. Actual results may differ materially from those described in this Market Update. The views expressed in this communication should not be attributed to Guild Mortgage Company as a whole and may not be reflected in the strategies and products offered by Guild Mortgage Company.
