Remember when Scott Bessent and Donald Trump were going to “focus on the 10-year Treasury yield” in an effort to bring down financing costs for Americans?
The quote’s from one of Bessent’s first interviews following Trump’s second inaugural. During the chat — with Larry Kudlow, naturally — Bessent sought to dispense with the notion that Trump intended to pressure the Fed, which of course doesn’t control the yield on benchmark US debt, or not directly anyway.
Rather than resorting to heavy-handed, autocratic measures like — and I’m just spitballing here — fishing for reasons to fire Fed board members and threatening to indict the Fed chair, Trump would instead put his energy into policies with the potential to lower long-end yields. That, um, hasn’t gone as planned, to put it politely.
Between the tariffs and the war, 10-year US yields are uncomfortably close to the post-GFC highs north of 5% reached in October of 2023. Yields on the long bond are the highest in decades. And as a direct result of the most recent long-end fireworks, mortgage rates rose over the last week to 6.81% on average, the MBA said Wednesday. That’s the highest in a year.
There’s the chart. Rates are up 25bps since the Iran ceasefire collapsed and more than 70bps since Israel blew up Ali Khamenei and several of his family members on the last day of February. The MBA’s purchase app index (inverted on the left scale) was the lowest this week since Khamenei’s death.
In the editorial accompanying Wednesday’s update, MBA SVP Mike Fratantoni mentioned Kevin Warsh’s bungled press conference, or I should say alluded obliquely to it. “In the wake of the July FOMC meeting, longer-term rates increased,” he said, referencing the steepener unleashed by Warsh’s obfuscating.
“Application volume for both refinance and purchase loans declined, and are now running behind last year’s pace,” Fratantoni went on. “Higher mortgage rates have weakened overall demand.”
It’s a good thing Trump could, as he famously put it, “stand in the middle of Fifth Avenue and shoot somebody, and [not] lose any voters.” Because this is the sort of thing that… well, that loses you voters.
