09/25/2026
It's official.
As the bond market "meltdown" accelerates, the average interest rate on a 30Y mortgage in the US is up to 7.45%. That's up +150 basis points in 6 months and the highest since 2023, when inflation was at 6.4%+.
What is happening? Let me explain.
To say the least, the last 2 days have been historic for the bond market. The 10Y Note Yield is now up +30 basis points in 2 days. Yesterday marked its largest daily gain since April 9th, 2025, on "Liberation Day." Something seems to have changed over the last 48 hours.
So, what's happening?
At its core, inflation is the issue. Brent crude oil prices are back above $105/barrel and diesel prices are at record highs. US consumers expect inflation to rise to ~4.6% over the next year, the 3rd-highest reading in 12 months.
But, there's more.
The surge in diesel prices comes in the midst of peak diesel demand season globally. Global diesel consumption rises by 2 million barrels/day during this period. Truckers are paying +100% more for fuel than they were 9 months ago. 4% inflation is low in this backdrop.
But, the question is, what changed over the last few days? In my view, the market is now taking the Fed more seriously. For months, markets were hesitant to price-in rate hikes because Fed Chair Warsh was appointed by Trump specifically to CUT rates. That changed 8 days ago.
8 days ago, the Fed released their first unanimous decision since May 2025. They hiked rates and were fully unified on it, even after months of dissents in favor of cuts. "The Committee will deliver price stability," the Fed said. This was a clear signal to the market.
This decision was more than a 25 basis point hike, it was a statement. The Fed and Fed Chair Warsh made it clear that they are committed to their 2% inflation target and political pressure won't change that. Now, markets are pricing in 100 basis points of hikes by next summer.
As a result, interest rates are moving sharply higher across the board. The bond market is trading like the Fed should have raised rates by 50 basis points last week. Attempted intervention by the US Treasury barely even caused a bump. This is a major shift in sentiment.
Today, the average rate on a 30Y mortgage surged by +17 basis points, to 7.45%. This is the highest since November 2023. Early-2023 came with 6%+ inflation, rate hikes, and an economy recovering from pandemic stimulus. Mortgage rates are seemingly back in a similar position.
This didn't entirely happen "overnight."
As I have been warning for years, the US deficit spending crisis is at unsustainable levels.
The US now has to issue to much debt to finance its deficit, that bond prices are dropping as a result. It's basic supply-demand dynamics.
As we look ahead, the broader thesis does not change. Rates are rising, inflation is rising, and asset owners will be the only winners. We believe this period of 3-4%+ inflation will persist into mid-2027. Many of the leading indicators support the outlook on this.
Lastly, the USD has lost 40% of its purchasing power in 10 years.
As long as deficit spending and inflation continue, this trend will accelerate.
Unfortunately this will cause further financial hardship for people: own assets or be left behind.
