WASHINGTON — A Treasury Department plan to buy back more long-term government debt briefly raised hopes for lower mortgage rates, but rising concerns about inflation, federal deficits and oil prices have quickly overshadowed any potential benefit, according to a new analysis.
The analysis was released by Housing Wire, which also said new data from its Mortgage Rates Center on Tuesday revealed that rates for 30-year conforming loans averaged 6.92% — up six basis points from one week ago. Rates for 30-year loans backed by the Federal Housing Administration(FHA) rose four bps to 6.63%, while 30-year jumbo loan rates posted the eye-catching move of the week, rising 34 bps to 7.14%, the company said.
The Treasury Department announced last week that it intends to begin buying back more long-term Treasury debt in an effort to stabilize the bond market and reduce yields. The program is scheduled to begin Sept. 9.
Because mortgage rates tend to track longer-term Treasury yields, the announcement was viewed as potentially positive for housing finance. But HousingWire reported the effect so far has been short-lived.
Short-Lived Effect
“The change was meant to bring bond yields down and the costs of borrowing down,” Melissa Cohn, regional vice president for William Raveis Mortgage, told HousingWire. “It lasted for a day, and then oil prices, the federal deficit, and everything else came roaring back to the front page, and mortgage rates are higher yet again.”
Inflation, Federal Debt Weigh on Bonds
Cohn said investors appear more focused on inflation and the growing federal deficit than on the Treasury’s planned purchases.
Federal data show the national debt recently surpassed $40 trillion, while the federal deficit for fiscal 2026 is about $1.8 trillion, according to HousingWire.
“I think the bond market is more concerned with inflation, and more concerned with the burgeoning federal deficit,” Cohn said.
She also questioned the timing of the Treasury initiative, particularly given developments in oil markets and other inflationary pressures.
“We’ve already seen any potential benefit, and it was short-lived,” Cohn told HousingWire
Treasury Account Could Fund Purchases
CNBC reported Monday that Treasury Secretary Scott Bessent could use money from the Treasury General Account to finance the bond purchases, according to HousingWire.
The account, which is maintained at the Federal Reserve and funded through government revenues, currently holds about $950 billion.
That is substantially above the $550 billion to $600 billion balance targeted during the Biden administration, according to the report, potentially giving the Treasury significant resources to carry out the purchases.
Fed Rate Cuts Disappear From Outlook
HousingWire said borrowers also should not expect near-term relief from Federal Reserve rate cuts.
Instead, the mortgage market may have to consider an unchanged federal funds rate as the more favorable near-term outcome as traders increasingly price in the possibility of another rate increase.
According to CME Group’s FedWatch tool, about 60% of interest-rate traders expect the Fed to leave rates unchanged at its mid-September meeting, while about 40% expect a 25-basis-point increase.
The market is not pricing in a rate cut until July 2027, HousingWire reported.
The shift represents a significant change from earlier expectations that the Fed could reduce rates in 2026.
Effort Being Overshadowed
Although the federal funds rate does not directly determine mortgage rates, Fed policy, inflation expectations and the outlook for government borrowing can influence Treasury yields and, in turn, borrowing costs for homebuyers, the analysis noted.
For now, HousingWire’s analysis suggests the Treasury’s attempt to push long-term yields lower is being outweighed by broader concerns in the bond market over inflation and federal borrowing.
