The 10-year note hit its highest level since 2007, as one economist warns there's no going back
Treasury yields resumed their march higher on Monday, with the benchmark 10-year US Treasury note rising more than 5 basis points to 5.234%, its highest level since June 2007.
The move extended a weeks-long global bond sell-off, bringing fresh pressure on home loan pricing and further narrowing the affordability window for American homebuyers.
The 30-year Treasury bond advanced nearly 6 basis points to 5.56%, approaching levels last recorded in 2004, while the 2-year note — which tracks near-term Federal Reserve (Fed) policy expectations — climbed more than 5 basis points to 4.918%.
One basis point equals 0.01%. West Texas Intermediate crude futures were trading around $92 a barrel, adding another layer of inflation pressure to markets already struggling to find a ceiling.
The 10-year Treasury is the key benchmark lenders use to price home loans. As Treasury yield pressure and war-driven inflation keep mortgage costs near their highest of the year, every sustained basis-point move shifts the affordability calculus for buyers and refinancers alike.
No relief in sight
Mohamed El-Erian, chief economic advisor at Allianz in Munich, offered a clear-eyed warning on CNBC's "Squawk Box" Monday morning: Treasury yields are not coming down even if commodity markets ease.
"The fundamental issue I want to stress [is] that we would be having this yield discussion, even if oil prices were lower," El-Erian said.
"We have an imbalance in longer-term demand for bonds and longer-term supply of bonds."
El-Erian acknowledged that a geopolitical resolution could bring crude prices lower, but drew a firm line between short-term energy dynamics and the structural forces pushing yields higher.
"If [the war] gets resolved, oil prices will come down," he said.
"But I'm willing to bet that 10-year yields will still be around 5%. We're not going back to four, four-fifty, four twenty-five, simply because there's too much of an imbalance in the supply and demand."
At the time of his remarks, the 10-year yield was trading up nearly 3 basis points at 5.209%, with US crude oil rising 2.8% to $94.96 a barrel.
A data-heavy week ahead
With yields already elevated, a dense economic calendar this week could extend the pressure. The August Job Openings and Labor Turnover Survey (JOLTS) report, expected Tuesday, is forecast to show job openings dipped slightly to 7.24 million from 7.27 million in July, according to analyst estimates.
The core Personal Consumption Expenditures (PCE) index and a quarterly GDP reading follow mid-week, with Friday's nonfarm payrolls and unemployment rate closing out the calendar.
Strong labor data has reinforced the Fed's higher-for-longer posture, and with it, persistently elevated mortgage rates.
For brokers managing client expectations this week, Friday's payrolls print could be the most consequential data point of the month.
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