According to Mortgage News Daily, average 30-year fixed mortgage rate hit 8% this morning, the highest level since mid-2000. Bond yields also surged today. 10-year Treasury yields for 10-year and 20-years notes are now 4.9% and 5.26% respectively.
Major banks have reported their quarterly earnings since last week. Due to the rising long term rates, their held-to-maturity unrealized losses have been staggering. Bank of America, despite beating their earnings, is sitting on $131.6B of unrealized losses with $188.5B of tangible equity at the end of Q3. It’s interesting how the long-term rate has been trending up. It’s possible the yield curve will become un-inverted not because the Fed cuts overnight rates but because the long-term rates go up. In any case, high rates across durations are causing serious stress in the banking system and making the national deficits worse. But t AFAIK here isn’t really a good solution right now. If we lower the rates, we are risking pushing up the inflation. But holding the interest rates high is super scary and something is gonna break.
with all those HTM unrealized losses seems likely we will see a wave of bank failures / M&A in 2024-25, especially for regional banks holding lots of CRE in coastal urban metros