Government Shutdown and McCarthy Firing Likely Has Direct Impact on Mortgage Rates

[Scott Trench]

Everyone has their opinion on politics, so I won't comment on good/bad/ugly happening in Washington, or how things ought to be. I ask that you don't either in replies to this thread. You aren't changing any minds. 

Without getting into the politics, however, it is important to point out and discuss the fact that the political situation impacts investors. That uncertainty around whether the US can avoid a shutdown in a month and a half (when the current short-term deal that got McCarthy fired expires) decreases confidence in US Treasuries and whether debt will be continually serviced. 

The 10-Year Treasury, which has been marching steadily upwards all year, increased from a 4.5% to a 4.8% yield on the news. If a government shutdown continues to be viewed as likely, upward pressure on the yield will continue. 

This will result in mortgage rates spiking, and indeed did, with 30-year rates zooming from ~7.6% to 7.8%. 

Investors beware - even if you end up correct on a bet that the Fed will lower rates in 2024 (which I am not confident in),  you might still see mortgage rates go up if the government can't make a deal in the near-term. A US Credit downgrade, be it because we simply spend too much, and can't balloon the national deficit/debt forever OR a downgrade because we simply can't agree on a budget in the first place result in the same outcome: rising interest rates for US borrowers. 

[JD Martin]

Quote from @Chris Seveney:

@JD Martin

I saw a report today that last 3 years of economic data were off significantly and they revised them. They were off so much I think the number was chances of them being off this much was 1 in 4 billion. Basically saying it’s impossible with out data being manipulated

It’s gonna get a lot worse and people have no clue just thinking everything hunky dory and home values will continue to go up. Curious where all that money comes from when Congress balances a budget and rates are 8%.

 I'm generally a pretty optimistic person when it comes to this stuff but I have started keeping more assets liquid and eliminating some of my leverage that's going to reset in the next 2 years because I'm uncomfortable with how things are going lately.