Barron's Streetwise Powell, Trump and Mortgage Rates
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Jan 16, 2026 John Hill, Head of U.S. inflation market strategy at Barclays, dives into the intricacies of mortgage rates and the Fed's influence. He discusses how lower Treasury yields are essential for reducing mortgage rates and examines the political pressures facing the Fed, including the impact of the White House's actions. Hill offers creative solutions like regulatory tweaks and Treasury buybacks to push down yields. While predicting mortgage rates remains challenging, he anticipates inventive policy moves ahead, making for an engaging conversation.
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MBS Purchases Have Limited Power
- Mortgage-backed securities purchases can lower MBS yields by raising prices and thus reduce mortgage rates marginally.
- But with MBS spreads already tight to Treasuries, the pass-through is likely only a few basis points, not percentage points.
Treasuries Set The Floor For Mortgages
- Mortgage rates can't sustainably fall much below comparable Treasury yields because Treasuries are the risk-free benchmark.
- To materially lower mortgage rates you must first push down longer-term Treasury yields.
Fed Cuts Don't Always Lower Long Yields
- The Fed controls short-term policy rates but that transmission to 10-year and 30-year yields is imperfect.
- Longer-term yields matter most for mortgages and they move for other reasons beyond Fed action.