US Dollar: Higher yields threaten housing and risk sentiment – MUFG
MUFG’s Derek Halpenny highlights how elevated US Treasury yields and rising mortgage rates are beginning to weigh on the US housing market, with Housing Starts and Pending Home Sales softening.
Higher yields are putting pressure on the US housing market and risk sentiment, according to MUFG's Derek Halpenny. Softening in Housing Starts and Pending Home Sales highlight the impact. Chairman Jerome Warsh's communication and the July FOMC meeting have driven a rise in real long-term yields. Upcoming FOMC Minutes may have limited FX impact unless volatility increases.
The 30-year mortgage rate is close to a one-year high at 6.75%, with room to retest the 2023 peak. As US Treasury yields remain at multi-decade highs, US households will quickly notice the affordability challenges. The rise in real long-term yields is driven by the term premium and uncertainty over monetary policy due to unclear communication from Warsh.
Limited FX fallout is expected until higher rates lead to a broader volatility spike, according to the article.
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