Mortgage rates were still 6.58% on Sunday night, but the bond market had already started to price in a softer path after President Trump said a deal had been agreed to and should be signed on Friday. The 10-year yield slipped to 4.43%, a modest move, but enough to show that the market was treating the conflict as less of an oil shock than it had been just days earlier.
That matters because the 10-year yield is the market’s immediate guide for mortgage rates. It had reached 4.46% to 4.48% on Friday, and the author behind the rate outlook said 4.35% and 4.24% were the lowest short-term yield levels he could justify for now if the market were really pricing the conflict as over. If those levels were reached, mortgage rates would likely move lower too, but not in a straight line and not all the way back to where borrowers would like them.
The reason readers were watching this so closely on Sunday night is that the move came with a real event, not just a mood shift. Trump’s announcement pointed to a deal being in place, and the logic is simple: less oil-related risk can mean less pressure on energy prices, which can pull Treasury yields lower and give mortgage rates some room to ease. Oil was still at $81 on Sunday night, and the author said it could have gone above $100 if the conflict were not ending.
Even so, the path down looks limited. Inflation is still well above target, the labor data has gotten better, and the Fed is now run by hawks with very few doves left. The author said he does not expect the Fed to talk about rate cuts, and that matters because he estimated that 65% to 75% of the range for the 10-year yield and mortgage rates is still determined by Fed policy. In other words, geopolitics can help rates drift lower, but it cannot overpower the central bank for long.
That is why the most likely near-term outcome is a modest move, not a collapse. Mortgage rates had already shown they can ease from the worst levels of the conflict, when they touched 6.75%, and the current 6.58% reading suggests some of the oil-risk premium is already fading. Still, the bigger test is not the headline about the deal itself. It is whether the Fed week ahead of it keeps the market from extending the rally in bonds and gives borrowers more than a brief break.
