10/20/25 REcap: Rates Fall to 2025 Lows On Powell Remarks & Treasury Drop

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Powell is Hawkish

Jerome Powell just gave his clearest hint yet that more rate cuts are coming—and markets loved it. Speaking at NABE, he admitted “the balance of risks has shifted,” noting that the Fed’s tightening campaign is likely done and that continued balance-sheet runoff could soon “cease to be appropriate.” In plain English: the door to more rate cuts is officially open and mortgage rates fell. If you recall, Powell has been hesitant to admit to more rate cuts.  Even after the first rate cut in 2025 last month Powell essentially said "we'll see".

But it's not just rate cuts that Powell is in favor of....

Powell also confirmed that quantitative tightening (QT) — the Fed’s effort to shrink its $9 trillion pandemic-era balance sheet — is nearing its end. That’s a meaningful signal for mortgage-rate watchers because of how the Fed’s balance-sheet mechanics flow through to the bond market.

When the Fed lets Treasurys and mortgage-backed securities (MBS) roll off its books, private investors have to step in to buy that supply. More supply = higher yields = higher mortgage rates. If Powell is preparing to slow or stop QT, that means less MBS supply hitting the market — and therefore, less upward pressure on mortgage-backed yields (which directly drive 30-year mortgage pricing).

His comment that reserves are starting to “gradually tighten” and that continuing QT could “hinder growth” was another green light for bond traders. It tells them the Fed is pivoting from draining liquidity to preserving it — the kind of policy turn that typically pushes Treasury and mortgage yields lower.

The 10-year Treasury Fell Below 4%

The 10-year Treasury yield just slid back under 4%—a level traders haven’t seen since April—and that’s huge news for mortgage rates. But while falling yields should be a tailwind for borrowers, the mood on Wall Street turned uneasy this week after JPMorgan’s Jamie Dimon warned that “when you see one cockroach, there are probably many more.” His comment followed new credit-loss disclosures at banks, Zions and Western Alliance, tied to potential fraud, adding to fears of a broader credit-quality issue lurking beneath the surface.

For mortgage markets, the irony is that fear is bullish: investors rushing into Treasurys for safety are driving yields—and mortgage rates—lower. The key question now is whether these cracks stay isolated or turn systemic. Either way, the bond market’s message is clear: risk is rising, and the Fed’s next move is still likely down. It's especially good news for those looking to refinance.

Looking Ahead: Limited Data, Big Implications

The next Fed meeting is in just 10 days and there's a 100% chance of a rate cut. Unfortunately without labor market or inflation data, the Fed doesn't know how big that cut should be. Waller, one of the Fed members in the running for the top spot in May, says that the available data shows enough for the Fed to act appropriately, and I hope he's right.