bond market blues

Mortgage rates are driven by bond yields, and those yields remain elevated on concerns over both the looming US debt levels and ongoing tariff concerns.

On the Debt front, the new US budget being proposed is viewed in a negative light by the bond market, as it looks to add more debt to an already bloated $37 trillion dollar deficit. The budget bill now moves to the Senate for final approval, but there is sure to be more negotiation to come. Any further revision to future debt level estimates could continue to push bond yields and mortgage rates higher.

On the tariff front, President Trump recently blasted the UK and threatened 50% fees unless a deal can be reached. Tariffs costs are feared to be passed along to consumers in the form of higher prices at the cash register, stoking levels of inflation higher. The markets are losing patience with tariff threats, so if no progress comes in the near future, look for bond yields to drift higher and the stock markets to sell off.

The tariff issues have unfortunate timing, as they are cancelling out what has been some recent material progress on the inflation front. Another important inflation report, the Personal Consumption Expenditure (PCE) is due out Friday. A cool reading on the PCE will no doubt be helpful to keep a cap on current mortgage rates, but don’t get your hopes up at this point for any meaningful moves lower until more clarity is seen with the budget and tariffs.

Home Loan Rate Volatility: HIGH
Home Loan Rate Trent: SLIGHTLY HIGHER