After a day off due to Veterans Day, it was back to higher bond yields again, which will translate to higher mortgage rates as well.
It seems to be correlating somewhat well to the AI trade, which is relatively hot again, despite the scandal with now-former Nvidia CEO Jensen Huang. And due to some choice comments by Trump regarding Iran.
At last glance, the bellwether 10-year bond yield was up a big 11 basis points, putting it back above 5% (and even north of 5.10%).
Mortgage rates will rise from around 7.375% to roughly 7.50% today as a result.
Bond Yields Higher Thanks to Tech and Trump
Today is a little bit of a catch-up day for bonds, which took Wednesday off.
While the hot CPI report from Tuesday was already baked in, yields moved another leg higher due to the AI trade and some fresh rhetoric from President Trump.
The first driver is the AI trade, which has correlated well with bond yields and mortgage rates lately.
In short, there’s been a flight to safety where an overheated stock market has moved into bonds, pushing yields (and mortgage rates) lower.
But recently there’s been a risk-on trade again, even in spite of Nvidia CEO Jensen Huang getting in trouble and voluntarily resigning today.
The swift decision by Nvidia and its board might be deemed a good thing, instead of dragging it all out for weeks or months.
The market seems to have shrugged off the controversy, with stocks relatively flat or even positive on the day so far.
At the same time, Trump riled the markets by saying, “We don’t need a deal with Iran. Those days have long since passed. We’ve got their money, Hundreds of Billions of Dollars, and we’ve got their Strait!”
So the conflict in the Middle East some people may have forgotten about is alive and well and putting pressure on oil prices.
Simply put, higher oil translates to higher inflation which translates to higher mortgage rates.
To put it all together, that will likely reinforce additional Fed rate hikes next month and beyond, which hurts mortgage rates as well.
Existing Home Sales Hit a 16-Year Low as Higher Mortgage Rates Hurt Affordability
In related news, existing home sales slid 5.5% in October to the slowest pace in more than 16 years, per NAR.
Sales fell to a seasonally adjusted annual rate of 3.75 million in October, which was the worst total since August 2010.
They were also 8.8% lower year-over-year as higher rates took the wind out of the market’s sails.
Many of those sales reflect contracts signed in August and September because they’re based on transaction closed during the month of October.
It can take anywhere from 45 to 60 days or longer to get a mortgage and close on a home.
During those months, mortgage rates began to rise, but got a lot worse in October.
So the damage from October’s higher mortgage rates probably hasn’t even shown up yet, and will make the November home sales numbers potentially pretty ugly.
Of course, NAR’s chief economist Lawrence Yun said, “there could be sizable pent-up demand if mortgage rates decline.”
Apparently prospective home buyers are waiting it out until rates come down, which could hurt sellers.
Despite that, the median price paid increased 0.4% from $414,900 one year ago, marking the 40th consecutive month of YoY price increases
Read on: Compare mortgage rates and monthly payments side by side with my mortgage rate calculator.
(photo: Eli Duke)
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