Treasury Tries to Push Rates Lower And Markets Push Back

Treasury Secretary Scott Bessent announced last week that the Treasury will at least double its buybacks of long-term government bonds, increasing each operation from $2 billion to at least $4 billion. The goal is pretty straightforward: buy more long-term Treasuries, increase demand for those bonds and hopefully push long-term yields lower. Since mortgage rates closely follow long-term Treasury yields, the announcement initially worked. The 30-year Treasury yield dropped sharply after the news, and mortgage rates moved lower with it.

The problem is that the bond market didn't seem to care for very long. By Friday, the 30-year yield had recovered almost its entire decline, while the 10-year finished the week around 4.73%, near its highest level since Bessent took office. Treasury can influence which bonds it buys and sells, but it can't make investors ignore inflation, massive government deficits, record debt levels and increased competition for capital. For now, the market appears to be saying that those bigger forces matter more than Treasury's attempt to push rates down.

There was one asset that definitely cared: Bitcoin. Bitcoin jumped roughly 23% last week, its best week in more than three years, while gold rose about 5% and the dollar weakened. On the day Bessent announced the larger bond purchases, Bitcoin surged about 7%. Even after Treasury yields bounced right back, Bitcoin kept climbing. Investors appear to be treating increased government intervention in financial markets as another reason to own assets that can't simply be created or issued by policymakers. Call it the debasement trade: if markets believe Washington is increasingly willing to intervene to keep borrowing costs down, Bitcoin and gold may be among the biggest beneficiaries.

Pending Home Sales Fall As High Rates Sideline Buyers

July was another slow month for the housing market. Pending home sales fell 2.3% from June and 2.2% from a year ago, dropping to their lowest level since January. All four major regions declined for the month, with the West hit hardest. The culprit is pretty clear: mortgage rates reached their highest levels of the year right in the middle of the summer buying season.

For buyers who aren't as rate sensitive, though, this can actually be a pretty good market. Fewer buyers means less competition, homes sitting longer and sellers becoming more willing to negotiate. Median listing prices were already down 2.4% from a year ago, and fewer homes are selling above asking price. That gives active buyers more leverage to negotiate price reductions, seller-paid closing costs and other concessions that were much harder to get when every house had multiple offers.

As always, real estate is local. Austin was actually one of the stronger markets in July, with pending sales up 1.6%, while San Antonio jumped 11.8%. Nationally the market is slow, but the amount of negotiating power a buyer has still depends heavily on the neighborhood, price point and individual property.

Home Construction Slows, But Builders Aren’t Giving Up

Housing starts fell 12.4% in July, including a 9.9% drop in single-family construction, as builders remained cautious in a slower housing market.

The better news was building permits, which jumped 5%, far above expectations. That suggests builders still expect demand to improve and are preparing for more construction ahead. For buyers today, softer demand can also mean more leverage to negotiate builder incentives, rate buydowns and closing-cost help.

What to expect this week?