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Late SOFR/Eurodollar/Treasury Option Roundup

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Mortgage Rates Renew Housing Pressures

  • The Freddie Mac 30Y mortgage rate jumped 42bps to 5.55% last week, the second largest weekly increase since the 2013 taper tantrum after a 55bp increase in mid-June.
  • It remains off late June highs of 5.81% (broadly lagging Treasuries, chart below) but is a sharp reversal from 4.99% in early August.
  • In doing so it could keep pressure on a housing market that has cooled significantly (part 1, part 2) before yesterday’s tentative stabilisation in July pending home sales, which now looks more in question.
  • Evidence of the re-tightening in financial conditions on the real economy will continue to add to growth concerns and at the margin adds to today's re-flattening in 2s10s to -28bps, after an already solid drag from residential investment on real GDP was confirmed in the earlier GDP data.

US Freddie Mac 30Y mortgage rate (yellow), 10Y Tsy yield (pink) and spread (red)Source: Bloomberg

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