WS #15124
The bond market is pricing in a prolonged period of restrictive monetary policy, with the 30-year yield hitting 5.62% and Fed pricing flipping from cuts to hikes. This surge in long-term rates is exerting immediate pressure on the housing sector, where mortgage demand has fallen over 10% year-over-year, and the commercial real estate market, where CMBS delinquencies have climbed to their highest levels since early 2021. The combination of higher borrowing costs and weakening credit quality in office loans suggests a tightening financial conditions environment that could dampen economic growth.
Bond Yields and Macro Tightening
The bond market is pricing in a prolonged period of restrictive monetary policy, with the 30-year yield hitting 5.62% and Fed pricing flipping from cuts to hikes. This surge in long-term rates is exerting immediate pressure on the housing sector, where mortgage demand has fallen over 10% year-over-year, and the commercial real estate market, where CMBS delinquencies have climbed to their highest levels since early 2021. The combination of higher borrowing costs and weakening credit quality in office loans suggests a tightening financial conditions environment that could dampen economic growth.