08/18/2026
Attention real estate agents. Are you wondering why interest rates are rising. Long read: however, worth the knowledge.
Interest rates are under pressure this week, pushing borrowing costs higher across the economy. At the center of the move is the 10-year Treasury yield, the benchmark that heavily influences mortgage rates and other consumer borrowing costs. The yield has climbed to 4.74%, near the upper end of its recent range, as investors grapple with persistent inflation concerns and an unprecedented wave of government debt issuance. Together, these forces are reinforcing the view that interest rates may remain elevated for longer than previously expected.
What makes today's environment unique is the sheer scale of government borrowing. In 2020, during the height of pandemic relief efforts, annual gross Treasury issuance reached a then-record $20.8 trillion. Today, gross annual issuance has surpassed $30 trillion, more than 40% above peak pandemic levels. Unlike 2020, when borrowing was tied to a temporary economic emergency, today's issuance reflects structural budget deficits and the ongoing refinancing of existing debt. At the same time, the Federal Reserve remains in Quantitative Tightening (QT) mode, allowing bonds to roll off its balance sheet rather than serving as a major buyer. As a result, private investors must absorb a significantly larger share of Treasury supply and are demanding higher yields to do so.
Mortgage rates have moved higher alongside Treasury yields. Because long-term mortgage pricing is closely tied to the 10-year Treasury, homebuyers and refinance borrowers are once again facing higher borrowing costs. For consumers, the combination of elevated rates and record government debt issuance continues to pressure affordability, making mortgages, auto loans, and other forms of credit more expensive as financial markets work to absorb the growing supply of federal debt.
As for today, treasury yields are modestly lower this morning following a mixed batch of economic data. Housing starts came in well below expectations, while manufacturing activity was generally in line to slightly better than forecast, and import prices unexpectedly declined, pointing to contained inflation pressures. The bond market has taken the data as modestly supportive, with UMBS recovering roughly 5 ticks from the morning lows as the session progresses. Overall, markets remain relatively calm, with MBS and Treasuries both grinding higher into late morning trade.
Please feel free to call me for interest rate updates (425)330-2038
