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Commentary By Allison Schrager

Economics Newsletter: Spread between Mortgage Rates and Bond Yields Is a Warning Sign

Economics Federal Reserve, Inflation

The hot question is when will rates go down? But by historical standards, rates are still not very high, especially after accounting for inflation. A 2% real yield is not so unusual, it may even be a little low. Add in higher deficits and a more uncertain inflation environment, rates may even go higher still. But what is unusual is the spread between a 30-year mortgage and a 10-year bond yield. It is higher than normal. It may be a hangover of the Fed's extraordinary interference in the mortgage market during the pandemic and different risk environment—bot of which will make homeownership more expensive for years to come.

Source: St. Louis Fed

Allison Schrager is a senior fellow at the Manhattan Institute. Follow her on Twitter here.

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