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Driving further de-escalation: The fragile two-week ceasefire between the U.S. and Iran is set to expire on Wednesday, April 22; however, recent up-and-down developments suggest that further diplomatic progress is shaky ahead of this week’s ceasefire expiration date. President Donald Trump mentioned to ABC News last Tuesday that extending the ceasefire may not be necessary as the conflict is “close to over.” In addition, late last week, Iranian officials announced that the Strait of Hormuz is open to commercial traffic. Those positive developments were sidelined over the weekend and were somewhat rescinded following disputes in the crucial waterway. President Trump announced that the U.S. naval blockade is set to persist for now, and further talks are tentatively being scheduled in Pakistan. While demonstrating delicate signs of progress, tensions between the U.S. and Iran remain high over disagreements over the existence of Iran’s nuclear program and strategies to normalize trade through the Strait of Hormuz – a critical passage for oil, gas, and other supplies. Additionally, the U.S. continued to deploy more troops to the region as the end of the ceasefire nears, and the Strait of Hormuz re-closed over the weekend, extending uncertainty into this week’s planned negotiations. Beyond geopolitical developments, the March Producer Price Index (PPI) inflation arrived below preliminary estimates last week. Even so, the annual rate climbed to the highest level since February 2023, driven primarily by a surge in energy costs. However, excluding food and energy, Core PPI slowed to just 0.1% (Est. 0.4%) monthly, suggesting that underlying inflationary pressures remain contained outside of the war-driven energy spike.

Yields slide on peace deal bets: Market sentiment improved over the week on hopes of a ceasefire extension. After a flurry of diplomatic headlines on Friday, the 10-year Treasury yield declined as low as 4.22%, nearly breaking through the 50-day moving average of 4.205% before closing last week at 4.25%. The ICE MOVE Index, a measure of bond market volatility, has continued to slide sharply below pre-conflict levels. Brent crude oil prices finished the week at around $90/barrel, down substantially from recent highs, yet still elevated by approximately one-third compared to pre-war levels. Market consensus now assigns slightly better than even odds to a Fed rate cut by December, according to the CME FedWatch Tool, compared to last week, when the first cut wasn’t fully expected until mid-2027. Rate cut optimism, though still contained, appears reflective of de-escalation sentiment towards the U.S/Iran conflict, particularly regarding the costs of goods being transported through the Strait of Hormuz. Meanwhile, the Fed’s latest Beige Book showed modest economic growth across most districts, though Middle East conflict uncertainty prompted many firms to adopt a “wait-and-see” posture on hiring and investment. The Beige Book reported that most Fed Districts described labor demand as stable and that price growth remained mostly moderate.

Credit spreads edged tighter on ceasefire optimism: Agency CMBS markets have seen continued interest from investors during the Iranian conflict, and new issue supply is being absorbed well. Fannie Mae DUS/MBS rate lock volume surged to over $1.2 billion over the week, led by several block-sized transactions of $25 million or more. The increase in supply last week was linked to lower perceived Iranian conflict risks due to the ongoing ceasefire and reported diplomatic progress from U.S. and Iranian officials. Credit spreads in generic standard-structured Fannie Mae DUS/MBS were flat to one basis point tighter. Investor interest continues to fixate on block-sized, standard structured Fannie Mae DUS/MBS with full-term interest-only payments and interest rate buydowns. Freddie Mac priced one floating rate K-deal last week, and their April PC pipeline continues to have a strong supply of floating rate transactions. Ginnie Mae Perm- and Construction-Loan spreads held flat to 1 basis point wider in subdued new issue trading.  Corporate credit spreads in the CDX-Investment Grade 5-year Index and Bloomberg Single-A Industrials 10-year Index finished the week approximately 1 bps tighter, and the indices are now near pre-conflict levels. Major banks reported first-quarter earnings last week, with results generally exceeding expectations. However, the lending environment showed mixed signals, with some institutions missing interest income expectations from loan portfolios while others reported loan growth and stable credit quality. Private credit discussions drew opportunistic messaging from bank management, with some citing opportunities to step in as some private credit firms pull back, while others allayed investor fears of how weakness in private credit markets could spill over into the traditional lending system.

Economic Calendar: (Week of 04.20.2026 – 04.24.2026): The coming week will be dominated by two critical developments that overshadow an otherwise quiet economic calendar. Kevin Warsh’s confirmation hearing for Federal Reserve Chairmanship is scheduled for Tuesday, April 21, though the path to confirmation remains uncertain as Senator Thom Tillis continues to block the nomination pending the DOJ’s investigation into the current Chair of the Federal Reserve, Jerome Powell. Controversy in the Fed’s upcoming leadership transition has continued to stir. Last week, President Trump threatened to remove Powell if he didn’t step down as a Fed governor after his term as Fed Chair expires on May 15. While most Fed Chairs have historically left after a leadership succession, Powell has not signaled a decision on the matter after his term as Fed Chair concludes. Meanwhile, the fragile U.S.-Iran ceasefire is set to expire on April 22 as both countries reportedly consider an extension to allow more time for peace negotiations. The trajectory of these talks will likely have far greater market impact than any economic data release for the week, as investors weigh the prospects for a lasting peace deal versus a resumption of hostilities that could send energy prices surging again.

On the data front, March Retail Sales will be released Tuesday morning and represents a potentially significant economic print in an otherwise quiet week. The report will provide insight into how consumers responded to the initial shock of the conflict and surging energy prices, though spending patterns may have shifted further since then. Other releases include Weekly Jobless Claims and preliminary S&P Global U.S. Services and Manufacturing PMI reports on Thursday. To close the week, University of Michigan sentiment and inflation readings will be released on Friday. Investors will remain fixated on headlines from the Warsh hearing and any developments in Middle East ceasefire negotiations, with economic data taking a back seat to these more pressing political and geopolitical uncertainties.

Economic Calendar: (Week of 04.20.2026 – 04.24.2026):

04/21: Tuesday

• Mar: Retail Sales (Est. 1.4%, Prev. 0.6%)

04/22: Wednesday

• Treasury Auction: $13 Billion 20-Yr Bond Reopening

04/23: Thursday

• Week of Apr 18: Initial Jobless Claims (Est. 210K, Prev. 207K)
• Week of Apr 11: Continuing Claims (Est. 1819K, Prev. 1818K)
• Apr Preliminary: S&P Global US Manufacturing PMI (Est. 52.5, Prev. 52.3)
• Apr Preliminary: S&P Global US Services PMI (Est. 50.5, Prev. 49.8)
• Apr Preliminary: S&P Global US Composite PMI (Est. 50.4, Prev. 50.3)

04/24: Friday

• Apr Final: U. of Mich. Sentiment (Est. 48.5, Prev. 47.6)
• Apr Final: U. of Mich. 1-Yr Inflation (Prev. 4.8%)