The 10-year Treasury yield hit its highest level since 2007, approaching 5%, which may not immediately break markets but could expose vulnerabilities in housing, commercial real estate, and heavily indebted companies over 12–18 months as refinancing at higher rates becomes necessary. The strain will likely emerge first in housing as mortgage rates approach 8%, followed by stress among leveraged borrowers and commercial real estate, with duration of elevated rates mattering more than the exact yield level.
Mortgage demand for adjustable-rate mortgages (ARMs) rose to 8.5% of applications as interest rates climbed, with 30-year fixed rates reaching 6.85%. Higher rates caused overall mortgage demand to decline 2.7%, particularly refinancing applications, though purchase applications remained relatively flat.