The Iran deal and the appointment of Kevin Warsh as the new Fed Chair have sparked curiosity about the future of mortgage rates. With the conflict ending, oil prices are expected to stabilize, which could have a significant impact on mortgage rates. The author outlines a scenario where the 10-year yield and mortgage rates reach 4.46%-4.48%, which was achieved on Friday. However, the labor market's improvement and persistent inflation make the Fed's actions crucial. The author predicts a critical Fed week, where the central bank's hawks may try to remove the easing bias and hint at potential rate hikes if inflation doesn't improve. The bond market's reaction to news about the conflict, economic data, and the Fed meeting will be a key indicator of bond traders' sentiment. The author highlights that mortgage spreads are better now, making it challenging to reach rates over 7%. The current situation has led to a discussion of another rate-hike cycle, with the best-case scenario for mortgage rates being 6.25%-6.375% following a favorable Fed meeting. The author concludes that while the conflict's end is positive, the Fed's policy and economic data will significantly influence mortgage rates, making it a complex and uncertain situation.
