Treasury pushes back on international fiscal warnings even as elevated yields keep US mortgage borrowing costs near 2026 highs
The Trump administration sharpened its rebuke of international fiscal watchdogs on Thursday, with a senior Treasury official directly challenging the International Monetary Fund’s authority to question US fiscal policy — even as 10-year Treasury yields hold above 5%, a level that has deepened affordability pressure on mortgage borrowers throughout 2026.
David Zervos, counselor to Treasury Secretary Scott Bessent in Washington, DC, and a former chief market strategist at Jefferies & Co. in New York, told CNBC.
“When we see pieces on the IMF, it’s good to remember how messy their forecasts have been in the past,” Zervos said.
The remarks came in response to IMF Managing Director Kristalina Georgieva, who warned delegates at the IMF-World Bank annual meetings in Bangkok on Wednesday that strong US economic growth would not be enough to put the nation’s $40 trillion-plus federal debt on a sustainable path.
She called for fiscal consolidation alongside growth strategies.
A forecast record under scrutiny
Zervos made his case through a list of historical miscalls. “In 2008, [the IMF’s World Economic Outlook] had world growth at 3% and we had the first global contraction in post-world history a year later. We saw them positive on Southeast Asia in 1997 before the collapse,” he said.
He continued: “We saw them very negative on Russia in 2022, and Russia actually barely saw a blip down in growth before it started growing strongly. We saw them very positive on Argentina after their big bailout of $57 billion. And by 2020, Argentina was basically in default again. And the history books go on and on, whether it’s Greece, whether it was the transitory call on inflation in the US.”
“So take it all with a grain of salt,” Zervos added. The IMF’s Georgieva has issued similar warnings to other major economies.
What brokers need to watch
For US mortgage professionals, the fiscal debate translates directly into pricing. The 30-year fixed mortgage rate averaged 7.4% as of October 8, the highest level since November 2023 and the seventh consecutive weekly increase.
This was driven by a bond market selloff that pushed the 10-year Treasury yield above 5% for the first time in nearly two decades.
US Treasury yields held elevated ground on Friday, nudged higher by a stronger-than-forecast inflation reading. The 10-year Treasury yield — the rate that most directly drives what lenders charge on fixed-rate home loans — added more than 1 basis point to 5.106%.
The 30-year bond yield moved in lockstep, rising to 5.439%, while the 2-year note edged up less than 1 basis point to 4.759%.
The Congressional Budget Office (CBO) projects that federal debt held by the public will equal 101% of GDP in 2026, a ratio last recorded in 1946, with net interest payments approaching $1 trillion this fiscal year.
Separately, the Institute of International Finance (IIF) placed total worldwide debt at $365 trillion in the first half of 2026, and warned in a September report that a “vicious cycle between elections and short-term quick fixes” was undermining governments’ capacity to achieve fiscal sustainability, keeping yields, and borrowing costs, stubbornly elevated.
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