Yields slipped as private payrolls fell, and lawmakers failed to reach a funding deal
Ten-year US Treasury yields, a key driver of 30-year fixed mortgage rates, ticked lower Wednesday morning as the clock ran out on a deal to avert a federal government shutdown.
The 10-year Treasury yield dropped nearly four basis points to 4.114%, while the 30-year bond yield slipped almost 2 basis points to 4.718%, which could mean Americans may see lower rates soon.
The move also followed a surprise decline in private payrolls for September, with ADP reporting a drop of 32,000 jobs. This is well below the 45,000 gain economists had anticipated. August payrolls were also revised downward, showing a loss of 3,000 jobs instead of the previously reported 54,000 increase.
If the government shutdown sidelines the Bureau of Labor Statistics (BLS), it will delay the official September jobs report that was due Friday. The Federal Reserve and markets may have to rely more on private data like ADP to judge the job market and set rates.
Fed chair Jerome Powell warned that challenges in jobs and inflation make the path ahead tough, leading investors to scale back expectations for rate cuts. Markets now see about an 80% chance of a Fed rate cut next month, with another likely in December.
The shutdown, triggered when the Republican-controlled Senate blocked a Democratic effort to extend health care tax credits, has introduced new risks for the mortgage and housing markets.
President Trump's threat of major federal job cuts could hurt the housing market, especially in DC, where home listings jumped earlier this year after many were laid off by the Department of Government Efficiency (DOGE).
Meanwhile, Glen Weinberg of Fairview Commercial Lending said the shutdown probably won’t move rates much and will be just a minor event in the bigger economic picture. However, he cautioned that the real risk is a hit to consumer confidence.
“When you get any uncertainty, that doesn't help the market whatsoever,” he told Mortgage Professional America.
"That's going to be the story: what happens with consumer confidence? If you look at the 10-year treasury on mortgage rates, it's probably not going to do much. If I look at even 30-year mortgage bonds, they're basically kicking around about where they were a week ago.”
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