Mortgage rates rattled as panic grips bond market 😱🚨📉
Midweek Market Update
Included in this update are the following sections:
MIDWEEK RECAP ⏪
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Geopolitics have taken over as the main market mover.
The topic of Greenland has been given most of the credit for recent volatility, but the bigger culprit is Japan and the carry trade.
Japan’s central bank has practiced some form of yield curve control for decades, keeping bond yields near zero and their currency (Yen) weak.
This has made it very attractive to borrow Yen near zero percent, including via JGB (Japanese Government Bonds), and invest in other markets where returns are better.
Governments worldwide continue to show no remorse for their fiscal profligacy, and as a result bond investors have started to demand higher yields.
When bond prices fall, yields rise, increasing the cost of the carry and reducing the arbitrage opportunities.
Global investors have been exiting the carry trade as it feels like the BOJ (Bank of Japan) is losing control of the long end (yield curve control is failing).
This puts additional pressure on global bond markets, including Treasuries, as investors need to sell other assets to close out their carry trade.
The exodus accelerated Tuesday when Prime Minister Takaichi dissolved parliament and called a snap election for February 8th.
Takaichi signaled her intention to pursue a more expansionary fiscal policy, while proposing a two-year suspension of the 8% sales tax on food and beverages.
In response, the rate on the 30-Year JGB increased over 30-bps in a day. This is multiple standard deviations outside of the norm, ending the rout just shy of 4% (3.92%).
It seems like the BOJ and the “powers that be” were able to wrestle yields back down, but this type of volatility leads to illiquidity in other markets when sudden margin calls on highly leveraged players can trigger flash crashes in what seem like uncorrelated markets, as a dash for cash unfolds.
IMPACT CALENDAR 📅
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Geopolitics aside, tomorrow includes two important economic reports.
Both the PCE and GDP data are for Q3 2025, delayed due to the shutdown.
Despite being outdated, they can still add fuel to recent volatility.
RATE PRICE INDEX 📉
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Mortgage rates do not rise or fall, instead the PRICE of rates change.
The LendZen Index calculates a daily change in the price of mortgage rates by tracking a spectrum of mortgage-backed securities (MBS).
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24-Hour: -5 bps (-$46 per $100K)
5-Day: +21 bps (+$207)
10-Day: -6 bps (-$59)
30-Day: -34 bps (-$335)
Learn more about the LendZen Index and explore the full data series at LendZen.substack.com
MORTGAGE SPREADS 🧈
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Published daily with the LendZen Index is the LendZen Mortgage-Treasury Spread.
The LMTS uses actual bond yields to create a historically consistent, and reliable, data set.
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Jan 14: 0.79
Jan 21: 0.81
24h: +2 bps
5d: +2 bps
12m Avg: 1.20
YoY: -46 bps
Learn more about the importance of mortgage spreads on this Substack post.
MBS-Treasury spreads have recoiled slightly since Trump first proposed purchasing $200B of MBS but still remain near multi-year lows, despite the 10-Year’s reluctance to fall below 4% for any sustained period of time since 2022.
RATE LOCK GUIDE 🔒
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The LendZen LOCK-O-METER provides borrowers with a risk-weighted score based on how various macroeconomic events, including market data, central bank announcements, and geopolitics, each historically impacts the price of bonds.
higher risk scores = lean towards locking
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Closing Window
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[ 15 Days ] — 78 🟠
Carry-trade stress and geopolitical volatility raise near-term risk. Even stale inflation data could spark outsized reactions in illiquid markets.
[ 30 Days ] — 62 🟠
Spreads remain supportive, but global bond instability adds a layer of uncertainty that nudges risk higher.
[ 45 Days ] — 50 🟡
The broader trend still favors floating, though external shocks make patience more tactical than passive.
[ 60 Days ] — 38 🟢
No change. The longer-term bond rally remains intact despite Treasury-side turbulence and global policy noise.
STOCK MARKETS (5-Day) 📊
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DJIA: 49,076 (-0.79%)
S&P 500: 6,875 (-1.22%)
NASDAQ: 25,326 (-1.49%)
CRYPTO (1-Week) 🧮
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Bitcoin: $89,333 (-6.23%)
Ethereum: $2,969 (-10.51%)
Solana: $129.12 (-11.18%)
PRECIOUS METALS (5-Day) 🪙
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Gold: $4,788 (+3.66%)
Silver: $91.72 (-0.58%)
Platinum: $2,444 (-0.62%)
Thanks for reading.
If you want to shop real-time mortgage rates and get instant qualification results without providing any contact information visit LendZen.com
LendZen provides a fully automated mortgage shopping experience that gives you anonymous access to all mortgage rates with full transparency of costs upfront as bond prices change.
LendZen Inc. is an equal opportunity mortgage lender, NMLS 375788.