Current Interest Rates
As of 8:30 this morning, the US 10 Year Treasury is down to 4.62%. Rule of thumb, add 3% to that for the 30-year mortgage rate.
As of yesterday 4 PM, the 30-year mortgage rate (national average, including points, etc.) is 7.69%.
In the short term, we should see some pressure coming off interest rates. Longer term, we may get well into 8% territory on the 30-year mortgage before things get better.
The PCE is a key metric for Fed Board decisions. It was 3.7% for September. The October number will be released November 30. Fed Chair Powell is targeting 2% that will stick for 3 – 6 months.
The Federal Reserve and Treasury
The US Federal Reserve left interest rates unchanged yesterday. Fed Chair Jerome Powell indicated that tight credit and higher rates the market is offering seems to be doing its job. He left open the possibility of increasing rates based on the data as it comes in. The next Fed meeting is Dec 13. The market is giving a 14.6% probability of a rate increase at that next meeting.
The US Treasury announced its refunding plans for future debt sales, a structure that Wall Street bond investors seemed to like, which took some pressure off interest rates yesterday and this morning.
Key items pushing interest rates higher include:
- The 5.25% – 5.5% federal funds rate, the wholesale rate the Fed charges banks.
- US Treasury is selling a ton of notes and bonds (borrowing) to replenish the general account after Congress removed the debt limit, and cover the historic federal deficit ($1.7 trillion) and debt ($33.7 trillion).
- The Federal Reserve has over $9 trillion in mortgage-backed securities and US Treasuries that is purchased to get the economy going after the Great Recession and COVID hit. It continues to sell those into the market at a rate of $75 billion per month.
US Congress – Debt and Deficit
The gross federal debt is $33.7 trillion. At the end of FY 2023 (September 30), the debt was $33.17 trillion, or 126.0% of GDP. The previous highest federal debt in US history was 119.0% GDP in 1946 just after World War II.
At the end of FY 2023 the federal deficit was $1,695 billion, or 6.4% of GDP. The highest federal deficit in US history was 29.0% GDP in 1943 in World War II.
