The Fed hiked 25 basis points to 3.75%–4.00% on a unanimous 12–0 vote, and mortgage bonds sat still for half an hour. They moved when Chair Warsh spoke: the 30-year closed at 7.24%, highest since January 2025, the 10-year at 5.018% and UMBS 6.0 down 16 cents at 99.35.
Bonds were higher all morning. By 11:40 AM the 10-year was down more than four basis points at 4.96% and the coupon stack was up better than a third of a point — this despite a hot data run at 8:30 AM: retail sales at +1.2% against a +0.8% forecast, the control group at +1.4% against +0.4%, import prices at +0.7% against +0.4%. The 2:00 PM statement changed nothing; the market sat flat from 2:00 to 2:30. The selloff began with the press conference and ran to the bell. The 10-year was at 5.011% by 3:31 PM and settled at 5.018%, up about a basis point on the day. UMBS 6.0 closed at 99.35, sixteen cents below Tuesday, after being up close to thirty cents at midday.
The hike was priced in. The framing around it was not. The statement struck the supply-shock language that had been softening the inflation paragraph, added a flat commitment to price stability, and folded in the three members who had been dissenting for a hike — hence 12–0. Warsh then described an economy that is strengthening, inflation that hasn't improved, and policy that still needs accommodation removed. "Some" accommodation implies more of it left to remove, and nearly half the committee now projects at least two more hikes in this cycle. Read the curve and you can see exactly how that landed: the 2-year jumped 7.3 basis points to 4.736% and the 5-year 5.3, while the 10-year moved 1.7 and the 30-year Treasury actually finished slightly lower in yield at 5.362%. The front end repriced the hiking path; the long end didn't flinch. That 2-year was *down* four basis points this morning — an eleven basis point round trip in a single session.
For borrowers, the distinction the day made is worth holding onto: the Fed Funds Rate is not your mortgage rate. The hike landed at 2:00 PM and mortgage bonds sat still. What moved your rate was the 10-year and MBS reacting to a press conference thirty minutes later. The live question is no longer whether the Fed cuts — it is how many more times it hikes. A central bank that convincingly breaks inflation is what eventually pulls mortgage rates down, but a long end that refuses to sell off on a hawkish Fed is a slow-burn signal, not a near-term one. At 7.24% the rate environment is the tightest it has been in twenty months, and one session on either side of a Fed decision does not resolve it.
Thursday brings Housing Starts and Jobless Claims, both at 8:30 AM Eastern — the first full session on the other side of the decision, and the one that shows whether this afternoon's move holds or fades.
— David Burson, NetRate Mortgage