Mortgage rates are at their highest point in nearly three years as turmoil in the bond market continues.<\/p>\n
U.S. Treasury bonds continued selling off on Thursday, driving yields on the most closely watched bonds to their highest levels since 2002.<\/p>\n
The yield on the 10-year Treasury rose as high as 5.34% in early trading. Over the course of the three months that ended Wednesday, the 10-year yield had its largest quarterly surge since 1994. The 30-year yield spiked to as high as 5.68%. <\/p>\n
As bonds sell off, their yields rise.<\/p>\n
The surge in the 10-year yield is driving U.S. mortgage rates higher, too. Late Wednesday, the average 30-year fixed mortgage rate rose to 7.6%, the highest it has been since late 2023.<\/p>\n
Yields are spiking for a number of reasons, but a major driver is inflation stemming from rising energy prices as a result of the wars in Iran and Ukraine. <\/p>\n
On Thursday, the average regular gas price in the U.S. remained 47% higher than it was in late February when the Iran war began. At the same time, diesel prices have soared 70% over the same period of time. <\/p>\n
While diesel is not often used by consumers, it is used widely in the shipping and farming sectors, meaning that higher fuel costs can easily trickle down to store shelves.<\/p>\n
Last week, S&P Global reported that \u201cprice pressures intensified in September\u201d for businesses at the fastest rate in four years.<\/p>\n
President Donald Trump on Wednesday said he was still considering whether he would ban U.S. exports of the critical fuel. However, experts, including some in his own cabinet, have warned that a ban would only drive up prices. <\/p>\n
A recent ban on exports of diesel from Russia has been widely cited by commodities experts as a major contributor to diesel\u2019s recent all-time highs.<\/p>\n
The Trump administration is also urging European allies, such as Germany and France, to release their emergency diesel stockpiles in another attempt to cut prices. <\/p>\n
\u201cI spoke with my French counterpart yesterday,\u201d U.S. Trade Representative Jamieson Greer told Bloomberg on Thursday morning. \u201cI let him know that this is an idea we\u2019ve had in the U.S., we would love to have a collaborative response to this.\u201d<\/p>\n
A spokesperson for the European Commission told reporters on Thursday that it would be holding an \u201cimportant\u201d meeting with the International Energy Agency on Friday about diesel supplies. \u201cWe will then take action as necessary,\u201d the spokeswoman said.<\/p>\n
On Wednesday, the Federal Reserve\u2019s favorite inflation indicator appeared cooler than expected, however many economists attributed that primarily to a technical change with how the data are calculated.<\/p>\n
\u201cCooler on paper, hot underneath,\u201d is how KPMG chief economist Diane Swonk summarized the number. <\/p>\n
The PCE index rose 3.4% on a year-ago basis, less than the expected 3.7% rise. Core PCE, which excludes food and energy, was just 3%, also less than the 3.3% expected by economists who were surveyed by Dow Jones. <\/p>\n
\u201cThe measuring stick moved. The inflation problem did not,\u201d said Swonk. <\/p>\n
Even with a methodological change, so-called \u201csuper core\u201d PCE, which excludes energy and housing, rose 0.4% in September. \u201cSticky is an understatement,\u201d Swonk remarked about that specific figure.<\/p>\n
With inflation still running hot, energy prices continuing to trend higher and yields rising, affordability still remains a major problem for consumers.<\/p>\n
Another Fed rate hike could also soon be on the horizon.<\/p>\n
Currently, market odds show an approximately 60% chance of a hike during the central bank\u2019s early December meeting.<\/p>\n
\u201cAffordability concerns extend beyond the government\u2019s inflation measures,\u201d said economists at PNC, which added that \u201csome of its methods may not fully capture the experience of consumers, particularly prospective homebuyers.\u201d<\/p>\n