The 10-year U.S. Treasury yield closed near 4.7% on Thursday, its highest since January 2025, and the climb is lifting the cost of mortgages and other consumer loans. Bond investors, not only the Federal Reserve, set the direction — and their worries about inflation point to little relief ahead.
Bond investors help set the interest rates Americans pay on homes and cars, and right now they are pushing them higher. The 10-year Treasury yield stood near 4.7% at Thursday’s close, its highest since January 2025. Many consumer loans, including mortgages and auto loans, often peg their rates to that yield, so borrowing costs rise as it climbs.
As a result, rates on 30-year fixed mortgages rose to about 6.6% on Thursday, the highest since August 2025, according to Freddie Mac’s weekly data. Rates on 15-year fixed mortgages climbed to about 6% this week, the highest since June 2025.
Why bond investors, not the Fed, drive these rates
The Fed sets the federal funds rate, which directly affects shorter-term borrowing like credit cards and other variable-rate loans, said Chad NeSmith, a certified financial planner at Tobias Financial Advisors. But bond investors tend to hold much greater sway over the 10-year Treasury yield and other longer-term rates.
Their expectations for future inflation and the path of Fed policy guide those yields. If investors expect inflation to move higher, experts said, they demand a higher yield to offset the risk to their future returns. Oil is one factor feeding that anxiety, with prices jumping sharply in July as Middle East tensions ratcheted upward. Gasoline topped $4 a gallon again this week.
More cost pressure may be coming
Other pressures are adding up for households. The Trump administration imposed new tariffs on dozens of countries on Friday, which economists say raise costs for consumers and businesses. Inflation, meanwhile, has run above the Fed’s target for more than five years.
Capital Economics expects the Fed to raise interest rates three times this year, not necessarily because of high oil prices but on a broader view that inflation looks hot, said Thomas Ryan, a North America economist at the firm. He described the rise in yields as “just another drag for households when you’ve got affordability hits elsewhere,” seeing little relief on borrowing costs.
Consumers will likely feel the impact most in their ability to buy or sell a home, NeSmith said. Mortgage rates are more than double their Covid-19 pandemic levels, experts said. They could move above 7%, which he warned would deepen the lock-in effect that leaves owners feeling trapped.
Source: CNBC
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