Headline: The Mortgage to 10-year spread is now at 319bp. While not a record, the last time spreads were this large was November 2022, and mortgage rates feathered down 100bp over the following 12 weeks. Either mortgage rates will decrease or Treasuries will increase.
As mentioned last week, the May 10 CPI announcement is not expected to have a material change given April 2022 monthly CPI was 0.3%. Actual turned out to be 0.4% and the CPI decreased from 5.0% to 4.9%.
The next CPI update is 5.13.23 and it is anticipated that the CPI will decrease from 4.9% to 4.2%.
For the week ending 5.11.23 Mortgage rates DECREASED 4bp to 6.58%.
For a $100,000 loan the monthly payment DECREASED by $3 to $637/mo or $0.09/day
Mortgage rates DECREASED 4bp, 10 Year Treasury rates DECREASED 2bp. The net difference resulted in an increase of 6bp in the spread to 319bp. With the historical spread being 168 there now exists a “safety cushion” of 151bp above the historical spread.
The historic spread between the 10 Year Treasury and mortgage rates is 168pb (see green line, right axis) and currently, there is a 151bp above the historical norm. For this spread to return to the historical norm, either mortgage rates will decrease or 10 Year Treasury rates will increase. The last time spreads were this large (Nov 10, 2022) mortgage rates feathered down 100bp over the following 12 weeks