Headline: Since the middle of March, mortgage rates have ranged from 6.50% to 6.65%. SVB bank failed on March 10. For this past week, mortgages increased 18bp while Treasuries also increased 18bp, a net decrease of 0bp in the spread.
Spreads of mortgage to 10-year Treasuries are 297bp which is 129bp above the historical average of 168. Either mortgage rates will decrease or Treasuries will increase.
The next CPI update is June 13 and it is anticipated that the CPI will decrease from 4.9% to 4.2%. The Fed meets on June 14. Other than the monthly jobs report on June 2 there are no major economic data releases scheduled. The debt ceiling is the major uncertainty at this time.
For the week ending 5.25.23 Mortgage rates INCREASED 418bp to 680%. Since the middle of March, mortgage rates had been in a tight range between 6.50% to 6.65%. SVB bank went under on March 10.
For a $100,000 loan the monthly payment INCREASED $12 to $ 652/ mo or $ 0.40/ day.
While mortgage rates INCREASED 18bp, 10 Year Treasury rates also INCREASED 18bp. This increase was spread over multiple days in small increments. The net difference resulted in zero change in the spread to 297bp. With the historical spread being 168 there now exists a “safety cushion” of 129bp 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 129bp 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. Treasuries increased 18bp this past week (the prior week was 26bp)
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