The jump in the spread between mortgage rates and the 10-year Treasury yield primarily reflects a rise in the credit risk premium as investors react to a slowing economy, surging inflation, and the war in Ukraine. As the economic outlook becomes more certain, spreads should therefore drop back, helped by a fall in the prepayment risk premium. That will keep mortgage rates close to 4.5% for the remainder of this year, before a further rise in the 10-year yield pushes rates to 4.7% by the end of next year.
Commodities Drop-In (24 March, 11:00 EDT/15:00 GMT): Our Commodities team will be exploring how the war in Ukraine is shaking up commodity markets, from oil to wheat, while tackling some of the big market questions – not least whether we’re in for 1970s-style oil supply shocks. Register here.
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