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Global Bond Market in Reprice Mode

Around here, “reprice” typically refers to mid-day rate changes from mortgage lenders, but infrequently, a big picture repricing occurs in the bond market. That’s what’s going on in March and especially over the last 2.5 days. Wednesday’s Fed comments and Thursday’s ECB/BOE comments confirmed that there’s a floor under short term rates for a vast majority of the planet’s reserve currency holdings, AND that hikes are quickly replacing cuts as the next likely move (September Fed meeting went from 0% hike chance to more than 25% in less than 2 days). Trading and investment strategies of a majority of the world’s investible capital was positioned for an entirely different reality before the Iran war. Now it is repositioning… repricing for new realities. 

Market Movement Recap

09:46 AM Sharply weaker overnight with additional selling all morning. MBS down over half a point and 10yr up 7.8bps at 4.327.

01:37 PM MBS down half a point and 10yr up 11.4bps at 4.364

After hitting 5.99% as recently as February 27th, top tier 30yr fixed mortgage rates are back over 6.5% for the average lender today–the highest they’ve been since September 3rd, 2025.  The entire month of March has been painful for many corners of the financial market and mortgage rates are not immune. The Iran war is the underlying catalyst as surging fuel costs force global central banks to rapidly reassess inflation expectations and the policy rate outlook. As we’re fond of repeating, an actual hike/cut of the Fed Funds Rate is of no concern to mortgage rates by the time it actually happens. But if Fed hike/cut  expectations are changing rapidly, mortgage rates will almost always be changing rapidly in the same direction.  That’s what’s happening this week–not just for the Fed, but also for the European Central Bank and others. The globally-coordinated hawkishness on the rate outlook causes additional volatility in the rate market for a variety of reasons. Investors increasingly believe that there is additional pain that needs to play out even if the war were to end today. That doesn’t mean rates can’t bounce for a day or two, but it does mean sustained improvement back to February’s levels is highly unlikely in the near term.

New home sales took a notable step back in January, reversing much of the prior month’s strength and highlighting the volatility that often defines this data series. The Census Bureau reported a seasonally adjusted annual rate of 587,000 , down sharply from December’s 712,000 and 11.3% lower than January 2025. For-sale inventory moved slightly higher to 476,000 , up 0.4% from December but still 4.0% below year-ago levels. At the current sales pace, months’ supply jumped to 9.7 months , up from 8.0 months in December and 9.0 months one year ago. The increase reflects the combination of softer demand and relatively steady inventory levels. Prices declined on both a monthly and annual basis. The median sales price fell to $400,500 (-4.5% MoM; -6.8% YoY), while the average price dropped to $499,500 (-5.9% MoM; -3.6% YoY). The pullback suggests a shift in the mix of homes sold, with less upward pressure from higher-priced transactions.
Sales (MoM): -17.6%
Sales (YoY): -11.3%
Inventory (YoY): -4.0%
Months’ Supply: 9.7 (up from 8.0 prior month; 9.0 YoY)

NOTE: the rates discussed in this article are from MBA’s weekly survey and pertain to last week.  This week’s rates have already moved significantly higher according to our daily data. Mortgage application activity fell sharply last week as rising rates weighed on demand. The Mortgage Bankers Association (MBA) reported a decrease of 10.9% on a seasonally adjusted basis for the week ending March 13. The decline was driven primarily by refinance activity. The Refinance Index dropped 19% from the previous week, though it remained 69% higher than the same week one year ago. MBA noted that conventional refinance applications saw the steepest pullback, as rates moved notably higher over the past two weeks. Purchase demand proved more resilient. The seasonally adjusted Purchase Index increased 1% from one week earlier and was 12% higher than the same week one year ago. Gains in FHA and VA purchase activity helped offset flat conventional demand, with improving inventory and slower home price growth continuing to support year-over-year strength. According to Joel Kan, MBA’s Vice President and Deputy Chief Economist, mortgage rates moved higher alongside Treasury yields, driven in part by elevated oil prices and broader inflation concerns tied to geopolitical developments. The average 30-year conforming mortgage rate rose to its highest level since December 2025.

Builder confidence ticked slightly higher in March according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), though sentiment remains subdued as affordability concerns continue to weigh on the single-family market. The headline index rose one point to 38 , following a small upward revision to February’s reading. While the increase marks a modest improvement, builder sentiment remains well below the breakeven level of 50 that separates positive from negative market conditions. The underlying components all posted gains during the month. The index measuring current sales conditions increased one point to 42 , while the gauge tracking prospective buyer traffic rose three points to 25 . The index measuring future sales expectations climbed two points to 49 , moving closer to the neutral threshold. “Affordability for buyers and builders remains a top concern,” said NAHB Chairman Bill Owens. He noted that many prospective buyers remain on the sidelines awaiting lower interest rates and greater economic clarity, while builders continue to grapple with elevated land, labor, and construction costs. NAHB Chief Economist Robert Dietz echoed those concerns, pointing to ongoing affordability challenges and uncertainty surrounding global events and energy prices as potential headwinds for the housing market. At the same time, he noted that recent efforts to reduce regulatory burdens on homebuilding could help improve long-term housing supply.