The overall economic climate in April 2025 was one of increased caution and potential headwinds. GDP contracted at a rate of 0.3% in the first quarter of 2025. This marks a significant shift from the 2.4% growth seen in the fourth quarter of 2024 and is the first contraction since the initial recovery phase of the COVID pandemic in early 2022. Consumer confidence fell in April, reaching its lowest level since 2020, reflecting growing concerns about the economic outlook, particularly regarding inflation and the potential impact of newly implemented tariffs. There was a surge in consumer spending in March, likely fueled by anticipatory buying ahead of the tariff implementations. While inflation showed a moderation in April, the looming effects of these tariffs are widely expected to exert upward pressure on prices in the coming months. Geopolitical turbulence persists with the Russia-Ukraine and Israel-Hamas wars grinding on interminably, and now, U.S. trade tensions. Oil prices are at $58/barrel.

The yield curve is now inverted through the 10-year. The 10-year Treasury is at 4.23, which is down 12bps from last month. The one-year is at 3.92 which is down 18bps from last month. The 30-year fixed rate mortgage is at 6.77% which is up 1bp from last month.

Prepay speeds remain low, although speeds on coupons above 6% are beginning to rise. The secondary market for servicing rights remains alive but cautious in its pricing. 

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