Headline: Mortgage to 10-year spread is now at 325bp. 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. The 100bp drop in CPI on 4.12.23 did not have an immediate impact on mortgage rates. Can not defy gravity or spreads forever.
The next CPI update release is May 10 and is not expected to have a material change given April 2022 monthly CPI was 0.3%.
For the week ending 5.4.23 Mortgage rates DECREASED 4bp to 6.62%.
For a $100,000 loan the monthly payment DECREASED $3 to $640/mo or $0.09/day.
Mortgage rates DECREASED 4bp, 10 Year Treasury rates DECREASED 16bp. The net difference resulted in an increase of 12bp in the spread to 325bp. With the historical spread being 168 there now exists a “safety cushion” of 157bp above the historical spread.
The historic spread between the 10 Year Treasury and mortgage rates is 168pb (see the green line, right axis) and currently, there is a 157bp 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.