Fed rate increases could lead to lower mortgage rates, Habib says - Mortgage Professional America

The headline reports that Habib, quoted by Mortgage Professional America, argued that Federal Reserve rate increases could paradoxically lead to lower mortgage rates. The proposed transmission channel runs through inflation expectations and term premia: if tightening succeeds in anchoring long-run inflation, long-end Treasury yields and therefore 30-year mortgage rates can fall even as the policy rate rises, flattening or inverting the yield curve. U.S. mortgage-backed securities and housing-linked equities are the most directly exposed, since their pricing tracks the 10-year Treasury and the mortgage spread, while the dollar could weaken if markets begin pricing a more credible inflation path and fewer future hikes. Traders should watch the next CPI release and the 10-year Treasury yield, along with the Freddie Mac Primary Mortgage Market Survey, for confirmation of whether mortgage rates are actually decoupling from the policy rate.

The US Dollar (USD) is the world's primary reserve currency and the base for most forex majors. Headlines about Federal Reserve policy, US macro data (CPI, NFP, GDP), and Treasury yield shifts typically drive USD pair direction within seconds of release.

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