> ## Content Index > Fetch the complete content index at: https://www.leadlagreport.com/llms.txt > Use this file to discover other available public pages before exploring further. # The Shock Absorber Is Gone - URL: https://www.leadlagreport.com/the-shock-absorber-is-gone/ - Published: 2026-09-28T17:12:14.000Z - Updated: 2026-09-28T17:12:14.000Z - Description: The mortgage-to-Treasury spread compressed from 320 basis points to about 185, in line with its 20-year average, just as the 10-year broke to 5.18%, its highest since 2007. Every basis point now lands on the buyer. - Author: Michael A. Gayed, CFA - Tags: Macro Observations ## *Today's Lead-Lag Report post is sponsored by GraniteShares* ![GraniteShares x Lead-Lag Media private advisor dinner, September 30, Northern New Jersey](https://storage.ghost.io/c/b8/9e/b89e006c-adc9-4384-b804-e802e23b544e/content/images/2026/09/gs_dinner_banner_v2.png) I'm hosting a small private dinner with the team from GraniteShares, one of the fastest-growing ETF issuers in the market, on **Wednesday, September 30, at 6:00 PM**, at a private venue in Northern New Jersey. Full location details come with your confirmation. The format is the reason to come: about 25 to 30 advisors, no formal presentation, no pitch deck, just dinner and a real conversation about where they see opportunity right now and what's coming next in their lineup. 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Attendance is limited and subject to availability.* --- # The Shock Absorber Is Gone ### *The spread between the 30-year mortgage and the 10-year Treasury compressed from 320 basis points at the 2023 peak to about 185, in line with its 20-year average. The cushion is gone, and the 10-year just closed at 5.18%, its highest since 2007.* **MICHAEL A. GAYED, CFA** ## Key Highlights - The 30-year fixed mortgage averaged 7.03% for the week of September 24, up 87 basis points since January and 73 from a year ago (Freddie Mac PMMS). - The mortgage-to-Treasury spread has compressed to about 185 basis points, in line with its 20-year average of 191, after averaging 247 since mid-2022 and peaking at 320 in 2023. - The 10-year Treasury closed at 5.18% on September 24, above its September 15 print of 5.041% that was already the highest since July 2007. - The median existing home sold for $410,700 in Q2 2026, down 7.2% from its Q4 2022 peak, yet the monthly payment on that home sits near $2,051 versus $2,323 at the 2023 peak. For three years, the housing market ran with a built-in shock absorber that nobody ordered but everybody used. Between the 30-year mortgage rate and the 10-year Treasury sat a spread that widened to extraordinary levels in 2023, over 300 basis points at its peak, and that width acted as a buffer on both sides. When Treasury yields spiked, mortgage rates rose less than they should have. When Treasury yields fell, mortgage rates were slower to follow. This month the buffer finished disappearing. The spread has compressed to roughly 185 basis points, in line with its 20-year average, at the exact moment the 10-year Treasury broke to its highest level since 2007\. The shock absorber is gone, and the road is now firmly connected to the wheel. Understand what that spread actually is. It bundles the cost of originating and servicing mortgages, the compensation investors demand for prepayment and duration risk, and the scars of 2022 and 2023, when lenders slashed capacity and the buyers of mortgage collateral repriced everything. When the Federal Reserve raised rates at the fastest pace in four decades, the mortgage market did not merely reprice, it restructured. Origination staff, correspondent networks, the appetite of banks to hold mortgage-backed securities, all of it shrank. A wide spread is what a damaged market charges to clear. Through 2023 and most of 2024, that damage was the dominant fact in housing finance. ![Spread between the 30-year mortgage and the 10-year Treasury, 2006 to 2026, compressed to 185 basis points](https://storage.ghost.io/c/b8/9e/b89e006c-adc9-4384-b804-e802e23b544e/content/images/2026/09/mtg1_spread.png) What makes this September different is the arithmetic of transmission. The 10-year Treasury has risen roughly 49 basis points in five weeks, to 5.18%, its highest close since 2007\. The 30-year mortgage has risen 38 basis points over the same window, to 7.03% for the week of September 24 per Freddie Mac. That is close to one-for-one. A year ago, when the spread averaged 247 basis points, a third of any Treasury selloff died inside the buffer. Now essentially all of it lands on the borrower. The 30-year mortgage is up 87 basis points since January, 73 over the year, and each fresh high in the 10-year passes through within days rather than being absorbed. The mechanism that protected the marginal homebuyer from the bond market has been rebuilt at the precise moment the bond market turned hostile. ![30-year mortgage rate and 10-year Treasury yield, 2006 to 2026, ending at 7.03 and 5.18 percent](https://storage.ghost.io/c/b8/9e/b89e006c-adc9-4384-b804-e802e23b544e/content/images/2026/09/mtg2_levels.png) The affordability math shows how little slack remains. On the median existing home, which sold for $410,700 in the second quarter, down 7.2% from its Q4 2022 peak, a buyer putting 20% down at 7.03% faces a principal and interest payment near $2,051 a month. In 2000, the same construct on the same median home cost about $823\. The payment peaked near $2,323 in late 2023, when the mortgage rate hit its cycle high near 7.8%. So the market did adjust over the past three years, but through price, not through financing, and only partially: home prices fell 7% while the payment fell 12% from its peak, and it is now climbing again with every basis point the Treasury market adds. ![Monthly principal and interest on the median existing home, 2000 to 2026, near $2,051 versus $823 in 2000](https://storage.ghost.io/c/b8/9e/b89e006c-adc9-4384-b804-e802e23b544e/content/images/2026/09/mtg3_payment.png) The counterweight to all of this is the locked-in homeowner, and that story is also quietly turning. Per a Redfin analysis of FHFA data, late last year, for the first time since the pandemic, more mortgaged homeowners carried a rate above 6% than below 3%. The golden handcuffs are coming off one link at a time, and every owner who accepts today's 7% rate to move adds supply to the market. That is healthy normalization in the long run, more inventory, more transactions, a market that clears, but it arrives exactly when financing is the most expensive it has been in two decades. Supply unlocks into expensive money. The implication is that housing is now, more than at any point since 2022, a direct bet on the long end of the Treasury curve. The Fed's policy rate matters for housing far less than the 10-year does, and the 10-year is being set by deficits, term premium, and inflation expectations, none of which respond to mortgage affordability. Every basis point of the fiscal-driven selloff in Treasuries now lands in full on the marginal buyer, and through the slowly thawing lock-in effect, on more sellers deciding whether to move at all. The honest counterpoint: a normalized spread is a sign of a healed market, origination capacity will rebuild, and the wide-spread era was itself a distortion. But cushions are only missed after they are gone. Few understand this. — — — ## Notes - Freddie Mac Primary Mortgage Market Survey, 30-year fixed-rate mortgage 7.03% for the week of September 24, 2026, 6.95% the prior week, 6.30% a year earlier: [Freddie Mac PMMS](https://www.freddiemac.com/pmms?ref=leadlagreport.com). - 30-year mortgage minus 10-year Treasury spread: 185 bp on September 24, 2026; 20-year average 191 bp; 247 bp average since June 2022; 320 bp peak in 2023\. Computed from FRED [MORTGAGE30US](https://fred.stlouisfed.org/series/MORTGAGE30US?ref=leadlagreport.com) and [DGS10](https://fred.stlouisfed.org/series/DGS10?ref=leadlagreport.com). Charts 1 and 2 use these series. - 10-year Treasury 5.18% on September 24, 2026 (FRED DGS10); 5.041% on September 15 was the highest since July 2007: [CNBC](https://www.cnbc.com/2026/09/15/10-year-treasury-yield-rises-to-highest-since-2007.html?ref=leadlagreport.com); 5.1% first time in 19 years on September 23: [CNN](https://www.cnn.com/2026/09/23/investing/us-bond-market-fed?ref=leadlagreport.com). - Median existing-home price $410,700 in Q2 2026, peak $442,600 in Q4 2022, FRED series [MSPUS](https://fred.stlouisfed.org/series/MSPUS?ref=leadlagreport.com). Chart 3 computes monthly principal and interest on this series with 20% down at the PMMS rate. - More homeowners with a rate above 6% than below 3%, first time since the pandemic, per Redfin analysis of FHFA data: [CNN](https://www.cnn.com/2026/09/05/economy/homeowners-locked-in-to-higher-mortgage-rates?ref=leadlagreport.com), September 5, 2026. *The Lead-Lag Report is provided by Lead-Lag Publishing, LLC. 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