Trump: "Our Interest Rates Should Be the Lowest"... Presses Fed Again as Mortgage Rates Hit 7.49% (Roundup)

U.S. Long-Term Yields Hit a New High Since 2002
Bessent: "Treasury Yields Are Rising on Robust Growth"
"They Will Stabilize Once the Iran War Ends"

U.S. President Donald Trump again urged the Federal Reserve (Fed) to cut interest rates as mortgage rates surged to their highest level in nearly three years. Meanwhile, Treasury Secretary Scott Bessent argued that rising long-term Treasury yields reflected robust economic growth and said rates would fall once the war with Iran ends.

U.S. President Donald Trump. White House

At a White House event on October 7, local time, Trump was asked about mortgage rates reaching 7.49%, their highest level since the start of his second administration. He said, "I think the (Fed) Board wants the country to do poorly."

He said, "I think Kevin Warsh is great, but Chairman Kevin is just one vote on a Board made up of many members appointed by Obama and Biden and a few appointed by me." He thus blamed other Board members for the failure to cut rates.

He went on to stress that the U.S. economy was doing well, saying, "Our interest rates should be the lowest. We should have lower rates than any other country."

Bessent, who attended the event with Trump, said the rise in 10-year Treasury yields, which affect mortgage rates, reflected "robust growth (in the United States)." He added that once the war with Iran ends, inflation would ease, and mortgage rates and 10-year Treasury yields would fall.

U.S. 10- and 30-Year Yields Hit Highest Levels Since 2002

Trump's remarks came after long-term U.S. Treasury yields climbed to their highest levels since 2002 before giving back some of their gains. According to the Financial Times (FT), Bloomberg and other outlets on October 8, the 30-year U.S. Treasury yield rose by as much as 9 basis points (1 bp = 0.01 percentage points) during the session to 5.73%, its highest level since May 2002.

The 10-year U.S. Treasury yield, the global benchmark for bond yields, also rose by more than 8 basis points to 5.356%, its highest level since April 2002. Bond prices and yields move in opposite directions.

Market analysts said bond selling was being fueled by uncertainty over when the war with Iran would end, the heavy public debt burdens of major economies, and robust U.S. economic data.

Evelyn Gomez-Richi, a multi-asset strategist at Mizuho, told the FT that a renewed rise in oil prices had dampened investor sentiment. She said high volatility in the bond market was also making long-term investors, including pension funds, hesitant to buy despite higher yields.

U.S. Long-Term Bond Yields Rise... Mortgage Rates Also Reach 7.49%

The pressure from rising Treasury yields is also spreading to the U.S. housing market. According to data released on October 8 by the Mortgage Bankers Association (MBA), the contract rate for 30-year fixed-rate mortgages for the week ended October 2 rose 19 basis points from the previous week to 7.49%. It climbed for a seventh consecutive week, reaching its highest level since November 2023. The increase over the past three weeks was about 0.5 percentage points, the steepest rise since early 2023.

Rising 10-year U.S. Treasury yields, which have a major influence on mortgage rates, are increasing homebuyers' financing costs. High home prices and mortgage rates are constraining a sustained recovery in sales of both existing and new homes. The MBA's index of applications for loans to purchase homes fell 2.1% from the previous week to its lowest level in more than a year. The refinancing applications index also fell 7.5%, extending its decline since mid-August.

Bond yields gave back some of their gains on October 8 after the U.S. Treasury's $39 billion auction of 10-year notes drew solid demand.

Minutes from the Federal Reserve's September Federal Open Market Committee (FOMC) meeting, released on October 8, also influenced the market. The minutes showed that most members had reached a consensus on one additional rate hike this year. However, they did not signal another hike at the October FOMC meeting. The minutes said the direction of monetary policy would be determined by considering new information on inflation, the economy and risks.

As a result, the market is focused on the September Consumer Price Index (CPI), which will be released next. If inflation data comes in stronger than expected, the likelihood of a rate hike is expected to increase. Conversely, if the data meets expectations or eases, the possibility of another rate hike is expected to be pushed to the December FOMC meeting.

This content was produced with the assistance of AI translation services.