01/27/2026
This past week interest rates moved up slightly and above key levels. Let's discuss what happened as we approach the Fed Meeting this week.
Greenland Fears Subsided
Global uncertainty gave markets an early jolt this week, but it didn't last. Heading into the World Economic Forum in Davos, Switzerland, markets were braced for worst-case outcomes around global policy coordination, growth, and geopolitical risk. Fears surfaced early Tuesday, triggering selling pressure in the markets. As the week unfolded, however, it became clear that the most disruptive scenarios had been avoided. A framework agreement on Greenland, outlining initial principles for cooperation, with key details still to be negotiated, helped ease concerns. As a result, stock markets staged a sharp rebound, erasing early losses and closing the week with solid gains.
Japan Yields Spike
The more meaningful pressure on US rates, however, came from Japan, not Greenland.
Japan's 10-year government bond yield surged to levels not seen since 1998, and that move rippled through global fixed income markets. Higher Japanese yields matter because global capital is mobile. When yields rise overseas, it competes directly with US Treasuries, putting upward pressure on rates here at home.
The spike in Japanese yields is fundamentally a bond-market protest. Investors are reacting negatively to Japan's fiscal outlook, particularly a plan that offers no credible path to stabilizing or paying down debt. With no clear funding solution, bond investors are demanding higher yields as compensation. That loss of confidence is what pushed yields higher, and why the move is being felt well beyond Japan's borders.
US Economic Growth is Strong
Back at home, the US growth story continues to do the heavy lifting. We received the third and final reading of GDP, which came in at a very strong 4.4%. Even more important than the headline number is the composition: growth was driven by the private sector. That matters because the US faces its own debt and deficit challenges, and the only sustainable way to address them is through economic growth, not austerity or financial engineering.
Looking forward, the growth tailwinds remain firmly in place. Atlanta Fed GDPNow is forecasting fourth-quarter growth north of 5.0%, reinforcing the idea that momentum is carrying into 2026. Strong private-sector growth gives policymakers breathing room and helps offset longer-term fiscal concerns; an important backdrop for both rates and risk assets.
4.20%
Last year, 4.20% on the 10-yr Note prevented yields from improving. Back in September, the 10-yr moved beneath 4.20% and stayed there until recently. This is important, because for mortgage rates to improve meaningfully, we need to see the 10-yr move beneath 4.20% again.
30-yr Mortgage Rates and 10-yr Note Yields
30-Year Fixed Mortgage Rates (Freddie Mac daily average, Jan 22, 2026)
Rate: ~6.09% (current average 30-year fixed rate)
Change from previous week: modestly up from ~6.06% (week ended Jan 15, 2026)
Change year-over-year: down from ~6.96% on Jan 23, 2025 (Freddie Mac)
10-Year Treasury Note Yields (daily close, Jan 22,?2026)
Yield: 4.25%
Change from previous week: up from ~4.16% last week (week ended Jan 15, 2026)
Change year-over-year: down from ~4.59% on Jan 22, 2025
Looking Ahead
The Fed meeting is the clear focal point for markets. As always, it's important to remember that there are three distinct market reactions to every Fed meeting, not just one. The first comes with the release of the Fed statement, where markets parse every word for changes in tone, inflation language, and policy bias. Small wording tweaks can have an outsized impact on rates in those initial minutes.
The second reaction comes during the Fed Chair's press conference. This is often where the real volatility shows up. Q&A can clarify or complicate the message in the statement, especially around future policy direction, confidence in inflation progress, and tolerance for financial conditions. It's not uncommon to see markets reverse course entirely as the press conference unfolds.
The third reaction comes the day after the Fed meeting, once markets have had time to sleep on it.This is frequently the most important move. With emotions removed and positioning adjusted, traders reassess what the Fed actually said versus how it was initially interpreted. Some of the most meaningful rate moves occur the following session, not on decision day itself.
Beyond the Fed, inflation data and supply will also matter. We'll get PPI later in the week, adding another piece to the inflation puzzle, along with a slate of Treasury auctions that will test demand at current yield levels. How buyers show up, especially at the long end, will help determine whether recent rate pressure sticks or eases.
