06/18/2026
MARKET UPDATE (quick synopsis- expect the FED to raise rates this year, not lower them...thanks inflation and all the reasons why!!!)
Key Points
• Treasury yields jump as the Fed signals possible rate hikes, shifting markets to price in tighter policy by late 2026.
• US Pending Home Sales Post Strongest Monthly Gain in Nearly Two Years as Buyer Demand Improves
• US retail sales rose 0.9% in May as broad-based consumer spending remained resilient despite higher gasoline prices.
Short-dated US Treasury yields surged after Federal Reserve officials signaled potential rate hikes in the coming months, with markets now pricing in higher borrowing costs by September or October.
Although the Fed left rates unchanged, its “dot plot” showed a divided outlook: nine officials expect at least one rate hike this year, while six see two or more, and the rest expect no change or cuts
The shift marks a sharp reversal from earlier in the year, when traders had priced in rate cuts. Since then, concerns over inflation and a resilient US economy have pushed expectations toward tighter policy. The Treasury market has also weakened, with benchmark bonds down about 1.5% since late February and 10-year yields rising roughly half a percentage point, lifting borrowing costs across mortgages and loans.
Following the latest projections, shorter-term yields climbed further, narrowing the gap between two- and 10-year Treasuries to its smallest in over a year, a move typically seen as signaling expectations that tighter policy will slow growth and inflation. Analysts described the Fed’s message as more hawkish than expected, driving the sharp rise in front-end yields.
Following the decision and repeated assurances from new Chairman Kevin Warsh that price stability remains the Fed’s primary objective, money markets priced in a rate hike by October.
US pending home sales posted their strongest monthly gain in nearly two years in May, providing further signs that the housing market is gradually improving.
Contract signings, which measure homes under contract but not yet sold, rose 3.8% from April to 76.8, according to data from the National Association of Realtors (NAR). The increase exceeded all economist forecasts surveyed by Bloomberg and marked the fourth consecutive monthly gain. Recent existing-home sales data also showed that completed home purchases reached their fastest pace of the year despite mortgage rates remaining elevated near 6.6%.
NAR Chief Economist Lawrence Yun said the recent rise in activity suggests many buyers are beginning to adapt to mortgage rates above 6% and are moving ahead with purchases after previously delaying decisions. Pending sales increased across all four major U.S. regions, led by an 8.7% gain in the Northeast, where improving inventory conditions have helped ease a prolonged period of tight supply and rising prices. Since homes typically go under contract one to two months before closing, pending sales are widely seen as a leading indicator of future existing-home sales.
