Capital Markets Commentary

Week Ending 4-17-2026 

Mortgage rates fell for the second consecutive week, with the Freddie Mac 30-year fixed rate declining to 6.30% as of April 16, a four-week low, as bond markets continued to price in a de-escalation of the U.S.–Iran conflict.

The ceasefire brokered April 7 triggered a sharp drop in oil prices from a peak of $118/barrel to approximately $91/barrel by week's end, easing inflation expectations and pulling the 10-year Treasury yield down from a cycle high of 4.44% in late March to approximately 4.26–4.29% this week.

The week's defining events were the March CPI report (released April 10), which confirmed what markets already knew: inflation spiked to 3.3% year-over-year, the highest since May 2024, driven almost entirely by a 10.9% surge in energy costs, while core CPI remained comparatively tame at 2.6%. Markets largely looked through the headline spike given the war-related nature of the increase.

The Equity vs. Rates Disconnect

A notable divergence has opened across asset classes in the wake of the U.S.-Iran conflict. Equities have raced back to all-time highs. Both the S&P 500 and Nasdaq have fully recovered and then some, but rates and energy markets are telling a more cautious story, and that tension is worth watching closely.

The S&P 500 dropped roughly 8% from pre-war levels at the height of the conflict but reversed sharply after President Trump announced a two-week cease-fire on April 7, with markets pushing to new records even through the naval blockade of Iranian ports. Bond and oil markets haven't followed suit.

The 10-year Treasury yield currently sits at 4.244%, down from a peak of 4.44% in late March but still meaningfully higher than the 3.961% it closed at on February 27 just before the U.S. and Israel launched the initial strikes on Iran. That's roughly 28 bps of structural backup that has not unwound with the equity rally.

What's Keeping the 10-Year Elevated

Several factors are converging to keep upward pressure on yields:

• Inflation re-acceleration — Core PCE is expected to print above 3% later this month, up from 2.8% last October, moving in the wrong direction relative to the Fed's 2% target
• Fed rate cut expectations have collapsed — Before the war, markets priced a 79% probability of at least two Fed cuts in 2026. That's now down to just 11%, with a full cut by year-end now essentially a coin flip
• Energy prices — Oil remains 14% above pre-war levels despite pulling back from recent highs, keeping inflation expectations sticky
• Fiscal/deficit concerns — The Supreme Court's ruling invalidating a significant portion of Trump's tariffs, combined with increased military spending, has renewed concern about deficit financing and Treasury supply

Stocks have priced in a return to normalcy. Rates and oil have not. Until inflation rolls over and the Fed gets room to move, the 10-year is likely to remain range-bound at elevated levels; a headwind for mortgage markets.

Spreads

Primary/Secondary spread sits at about 108bps, about 8bps worse than January 8^th, the day the GSE MBS buy program was announced.

Spreads for new-issue non-QM are around 125bp (25 CPR/4y call) this week, a stark turnaround from 100–105bp mid-to-late January. Spreads have only widened since the start of the conflict in Iran

Housing

On the housing front, March existing-home sales declined a further 3.6% to a 3.98 million annualized pace as higher rates during February and March weighed on buyer demand, though the median home price rose to a new record for the month at $408,800 as limited inventory continues to support prices. Inventories climbed to 743,006 active single-family listings for the week of April 10–17, up 3.21% year-over-year, but inventory growth has decelerated sharply from the 33% year-over-year peak seen in mid-2025.

The housing market enters spring 2026 in a state of slow-motion rebalancing, but the Iran conflict and the associated rate backup have complicated what was already a fragile recovery. Rates were widely expected to drift toward the low-6% range this year, which would have been a meaningful affordability unlock, but that thesis has stalled with the 10-year stubbornly above 4.20% and 30-year conforming rates pushing back toward 6.3%.

While inventory levels have risen, the increase reflects sluggish sales more than meaningful progress toward resolving the long-term shortage of single-family homes. The shortage resulted from more than a decade of chronic underbuilding that continues to place a floor under prices.

The national price picture is increasingly bifurcated: Sun Belt markets that surged during the pandemic such as Miami, Austin, Tampa, Houston are now swimming in supply, with some approaching eight months of inventory, while Rust Belt and Midwest cities like Kansas City, Pittsburgh, and Cleveland are seeing some of the strongest appreciation in the country.

Nationally, home price appreciation has slowed to just 1.1% year-over-year through February, the slowest pace since 2012, with AEI projecting prices could go modestly negative by year-end. Rate-sensitive borrowers remain on the sidelines, refis have pulled back sharply, and any meaningful volume recovery is tied directly to where the 10-year settles once the geopolitical dust clears.

Market Data (from my GPT Assistant)

FEDERAL FUNDS RATE

NEXT FEDERAL RESERVE MEETING