Mortgage rates explode to 6-month high as inflation death blow awaits 🚨📈☠️
Flash Market Update
Mortgage rates do not rise or fall, instead the price of each rate changes uniquely based on individual mortgage-backed securities.
Although slightly different in structure than a typical bond, MBS are often referred to as mortgage bonds.
Bond prices react negatively to inflation.
War is inflationary.
Oil supply disruptions are inflationary.
A war that causes oil supply disruptions is a lethal combination for bond markets.
When the price of “mortgage bonds” decrease, the PRICE of mortgage rates increase.
This has been the outcome for the last two weeks, with MBS some coupons down over 200 bps.
On Friday, February 27th the price of MBS peaked at levels only touched a few times since 2022.
It has been a disaster ever since, sending mortgage rates to their highest levels of 2026 and as far back as September 2025.
The sell-off in MBS has been more dramatic than the reaction in government bonds.
This means mortgage rates have experienced a lot more pain in the last two weeks than Treasuries.
This is illustrated clearly in the spread between MBS yields and the 10-Year Treasury which ripped wider by 10-bps on Thursday, breaching 100-bps for the first time since December 17.
Until things calm down in the Middle East the economic calendar is unlikely to help, and today’s PCE inflation report could be the nail in coffin if the data comes in hotter than expected.
At the end of each week, I post the Mortgage Rate Price Tracker which follows specific rates throughout the month to illustrate how the price of each has changed.
Stay tuned for the Week 2 update, which will be a contrasting report given the sharp move higher since the month began.
Thanks for reading.
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