The bond market was rocked last week when drama surrounding the debt ceiling sent yields soaring and pushed mortgage rates to their highest level of the year. Bond prices are inversely related to yields, so as yields increased, bond prices dropped. Falling bond prices meant that mortgage rates increased–reaching a 2023 high in the middle of the spring home buying and selling season.

The increase in yields drew attention because it represents a stark change from the previous two years, when the US Treasury’s borrowing needs and the federal government’s budget deficits kept yields relatively steady. Growing concerns about inflation may have spooked investors, as the Federal Reserve has lost some of it’s power to influence yields and interest rates.

Most important elements:
* Bond prices dropped when yields increased due to debt ceiling drama, leading to an increase in mortgage rates
* Mortgage rates rose to a 2023 high in the middle of the spring home buying and selling season
* Yields rose in stark contrast to the previous two years, leading to growing concerns over inflation
* Federal Reserve’s power to influence yields and interest rates is waning

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