Recent economic data has been bond-friendly, with cooling retail sales and an elevated Jobs report. However, Housing Starts and Building Permits reports showed significant declines, indicating that tight monetary policy is still in place and home builders are facing higher borrowing costs.

Meanwhile, mortgage rates have dropped below 7% for the first time since March, leading to an increase in mortgage applications not seen since January. Lower rates are providing some relief to potential homebuyers, making mortgages slightly more affordable. However, the continued weakness in housing construction data may offset the benefits, as fewer new homes are available in the market, limiting choices for buyers and potentially driving up prices of existing homes.

The market is now looking to the Federal Reserve to see how they will respond to this decline in economic data in the coming months.