The Fed isn’t expected to raise rates today, but Chair Warsh’s comments at this afternoon’s press conference could still upset the apple cart. The Fed’s job is to keep inflation in check. The problem is that much of today’s inflation is tied to the Iran conflict and the oil price spike that came with it. Higher interest rates can’t lower the price of oil or end a conflict overseas.

Real estate is local, but nationally, home values are up 2.1% year over year despite higher interest rates. The Fed kicks off its two-day meeting today, with the press conference tomorrow afternoon. We don’t expect a rate hike. Durable Goods Orders rose 1.8%, beating the 1.5% forecast. However, a surge in aircraft orders drove much of that gain, so it’s hard to tell how strong the underlying demand really is.

If a genie gave you three wishes, what would they be? I’m asking because one of those wishes might be sitting right in front of you. Here’s the real question: would you rather buy a home at the peak with a low rate, or buy that same home today at a discount with a higher rate? Think it through. You can change your rate later.

Happy Friday, everyone! Earlier this week we talked about the President’s Executive Order, “Decreasing Housing Costs for the American People.” In plain English: someone in Washington finally noticed housing is expensive. Groundbreaking stuff. Here’s what it does: It directs the FHFA Director to create a pilot program that proactively removes mortgage insurance premiums for eligible borrowers. Imagine your lender calling to say, “You can stop paying for this now.” I know.

France is facing nationwide unrest, with more than 500,000 protesters in the streets, and it’s showing up in their bond market. The French 10-year bond (the OAT, France’s version of our 10-year Treasury) jumped 10 basis points. Over the past two weeks, as France came into focus, its yields moved sharply higher. Yields around the world followed. W…

Ahead of the midterms, the White House is dangling a carrot. If these ideas are actually put in place, and not just floated, they could change the landscape for buyers and homeowners looking to refinance. What’s being proposed: Lower rates on VA and USDA loans. Proactive mortgage insurance cancellation. Lenders would notify borrowers when they’re eligible to drop mortgage insurance, so they don’t keep paying it longer than they need to.

Back in the day, a flight to safety was the canary in the coal mine. Stock and bond traders tend to sense trouble before everyone else does. And right now, something is up. Investors are worried about whether AI infrastructure companies can repay their massive debt, and the credit default swap market is pricing in a 55% chance of default.

Last week I talked about the companies building AI data centers, sometimes called “neoclouds.” They’re borrowing heavily to do it, with about $400 billion in bond sales. Why that matters for rates: Think of the bond market as one big pool of investor money. The U.S. government borrows about $2 trillion a year from that pool by selling Treasuries. When AI companies show up wanting another $400 billion…

The MOVE Index is elevated, and that matters for mortgage rates. The MOVE Index measures volatility in the bond market. It tracks how much traders expect Treasury yields to swing in the coming weeks, not which direction they’ll go. Think of it as the bond market’s “fear gauge,” like the VIX for stocks. Yesterday the MOVE spiked as yields dropped sharply.

One of the biggest players in the AI data center buildout is CoreWeave. Its business model relies heavily on debt, often highly leveraged loans secured by the GPUs and chips themselves. Investors are worried about two things: First, a small number of large customers account for much of the demand for this capacity. Second, chips and GPUs can become outdated quickly, possibly before the debt used to buy them is paid off.

CPI came in hot, as expected, rising 0.6% for the month. Annual inflation climbed from 3.4% to 3.7%, one-tenth higher than forecast. Bonds initially sold off sharply, but a contrarian indicator suggests the ceiling we talked about yesterday is holding. What’s a contrarian indicator? Barry Habib at MBS Highway shared a great example this morning. In 1929, Joe Kennedy is said to have called the stock market top while getting a shoeshine.

The conflict with Iran pushed oil prices higher, and those costs have rippled through the economy, from gas prices to groceries. That ongoing pressure on inflation has kept rates elevated longer than many expected. It has also squeezed buyers’ budgets and made many borrowers more hesitant to move forward. What changed today was the President stating that he would not bomb Iran before the midterms.

If you let the market be the market, it reacts in a fairly predictable manner. The trouble is that somebody always wants to "help." Here's the setup: for the first time in a generation, investors can get genuinely attractive yields in the bond market. After years of bonds paying roughly what a savings account pays in lint, this is the equivalent of the…

Mortgage bonds are holding the line at a key ceiling of 5.29%. For context, when mortgage rates averaged 5.99% last February, the 10-year was at 3.99%. Yesterday's Treasury auction was strong, a good sign that the peak may be in front of us. But oil is moving higher after reports that the President has asked the Pentagon for strike options on Iran ahead of the midterms.

France has a debt-to-GDP ratio problem at roughly 120%, and the EU isn't happy about it. The EU has a bond-buying tool for countries whose bonds are collapsing, but France isn't covered. Like an expectant father with sympathy pains, bond markets around the world are feeling it too, with yields rising in sympathy. The Cotality Home Price Index showed home values remaining relatively stable in August.

Softer economic data out of Europe is helping European 10-year yields move sharply lower, which in turn is helping global yields moderate. France is talking Quantitative Easing (QE), or in real English, buying bonds. Not just a few billion here and there, but a systematic plan to buy tens of billions of bonds to help lower interest rates. Reminder: Quantitative Tightening (QT)

A big part of the bond market volatility, even with underlying weakness in the economic data: bonds initially rallied following the cooler PCE report and much weaker jobs report, but those gains have evaporated. It's unclear why, but one possibility is Japan. They are the largest foreign holder of our debt, and they're dealing with a weakening currency. The weaker it gets, the more expensive imports become, and…

Fed President John Williams: "There is no need for urgency, and the Fed has time to gather more information." Translation: A rate hike is unlikely. Personal Consumption Expenditures (PCE) came in at 0.3% last month, one-tenth lighter than expected. Year-over-year, it dropped from 3.7% to 3.4% headed in the right direction at this point. Q2 GDP came in at 2.2%, versus the 1.5% expected.

Mortgage Bonds are continuing lower, with yields higher, meaning mortgage rates keep climbing. The housing market is stable for now, the way a Jenga tower is stable right before someone pulls the wrong piece. Rising rates mean shrinking approval amounts, and that pressure has to land somewhere, namely home values, as buying power quietly evaporates. Until tariffs are removed,

It's a combination of four things: The S&P Global Manufacturing report showed the economy running hotter than expected, triggering expectations for more policy tightening. Comments on inflation regarding average input costs for goods and services, which surged higher (oil) hit their highest level since 2022. Comments from Iran's President at the UN, which were inflammatory. Fed Governor Michael Barr also contributed to the bond selloff, stating that further rate hikes are likely to be needed.

Threats of annihilation toward Iran, viewed by the markets as an escalation, sent oil prices and yields higher (meaning higher mortgage rates). A representative who met with Iran described the discussion as very productive, lasting three hours. Later today, the Iranian President will be speaking at the UN, we're watching this closely. Volatility is exactly what the market dreads. As you can see from the graph below (down means higher rates), any sense of instability drives yields higher, resulting in higher mortgage rates.

Demand Destruction: The Fed's Favorite Party Trick Let's talk about "demand destruction", which sounds like a Marvel villain's origin story, but is actually just the Federal Reserve's fancy way of saying "we're going to make your life expensive enough that you stop buying stuff." That's it. That's the whole plan. No lasers, no secret lair, just interest rates, quietly turning your daily cup of coffee into a five-year financial decision.

Oil has dropped below $100 a barrel this morning, and that's giving the bond market a nice boost. Lower oil prices ease inflation worries, which is helping push mortgage rates lower today. A quick note on the "carry trade" and Japan's role in U.S. bonds: Japanese investors are among the largest foreign holders of U.S. Treasury bonds, largely through what's known as the…

The stock market and Mortgage Bonds are lower to start the day as news broke that Saudi Arabia's East-West pipeline is being repaired, restoring roughly 50% of pre-war production. Turns out nothing calms jittery markets quite like the promise of more oil flowing, supply worries ease up, energy prices cool off a touch, and traders react accordingly. It's a reminder of just how tightly global bond and stock movements are tied to headlines happening thousands of miles away.

If it quacks like a duck, waddles like a duck, and drones on about "data dependency" for forty-five minutes, it might just be Jerome Powell wearing a Kevin Warsh nametag. Honestly, watching Warsh speak yesterday was like watching a cover band play the Fed's greatest hits. Same chord progression, same mic-drop non-answers, same "we're closely monitoring incoming data" while incoming data is somewhere in the parking lot, still not here yet.