The 10-Year Note Mystery: What the Market Is Really Telling Us

SPEAKER_1 (0:01)

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Michael Zuber (0:27)

All righty, folks, I want to welcome you to opposite land. What do I mean? Well, the last 48 hours, we got a hot CPI print. We got a very hot PPI print. And yet the 10 year note is down both days. Also on that two days ago, the odds of a Fed rate increase were 20 percent. After hot CPI, they went as high as 50 50 And now after a really hot PPI, it actually went down. Now there's only a 30 percent chance of a rate hike. In all of this, mortgage rates are falling. So we have lots of questions. Will opposite land continue?

Have mortgage rates peaked?

Have the odds of rate increases completely flipped? What the heck is going on? Dustin, I don't know what's going on in your world, but I'm guessing your phone is ringing a lot with people going, rates are down, lock, lock, lock. What do you got?

Dustin (1:20)

Yeah, if you've been living in the mortgage industry and you've got an application in, and you've been here for the last five, six weeks, all you've heard from your mortgage lender or broker is, rates are going to keep going up, lock it, lock it, lock it, right? But in the last week, if you look over, just flatline across the board all products, rates are down a quarter point. Do I think that that's like a reversal? Do I think it's a trend reversal?

Absolutely not. But it goes right in line with what you just said at the beginning, which is opposite land, because everything inflation wise would have told us as well as treasuries wise, would have told us that those would have made rates go up another quarter, at least, at least in, you know, normal, not last five weeks, that would have made it go up a quarter. So I'm not the expert on the economy. I always like to hear your opinion and kind of figure out what you think is causing this opposite land that we got going on.

Michael Zuber (2:22)

Yeah, so I started to think about this yesterday, but I got to tell you, after the PPI print of 1.3 month on month, which means it's 15% if you annualize that, I was shocked to see at the open, the tenure was down 15 basis points. Yeah, 15 Now, now it's only down nine, but still it was down 15 at the open. And that's why I call it opposite land. So it doesn't happen a lot, but sometimes it does. And any time you get inflation up 10 year down, especially in the environment where you've got to ask why, what's new? And near as I can tell, people are flocking, flooding, running to the 10 year as a safety net. Yeah. Because there's more and more talk of the AI bubble, neo clouds, Gartner did a report about 80 percent of them going to zero by 2030 They're all scheduled to spend like a trillion dollars and they're like, well, how are they going to pay for it if they don't exist? Who's got the bad debt? Core weaves, bonds are now paying 15 percent. So I think what we're seeing is sentiment change.

For a while now, everybody believed AI was going to the moon, and now people are starting to question the math, and they're kind of selling first and asking questions later. So the big question is, how long can it last? Because again, we put in a pretty solid resistance on the tenure at 5.35. We've kind of tested it three times, and each time it held. Now we're approaching a floor at five, right? Five is the floor, and five, three, five is the ceiling.

So it's really going to be interesting to watch.

If the fear builds and people keep running to the tenure, we could break below 5 percent, which dude, if you were to ask me on Monday, I'd have been like, no chance. Yeah. Especially if you told me inflation was going to perk up. I'd have been like, you're crazy. But here we are.

Yeah.

Dustin (4:27)

If on Monday, you knew it was at 5.3, and you knew that inflation was going to come in extremely hot. Breaking six was a better odd play than breaking five.