198 bps: The Mortgage Spread Is the Story

The Number

198 basis points. That's the current gap between FRED's 30-year mortgage rate of 6.30% on April 16 and the 10-year Treasury yield of 4.32% the same day.

Two weeks earlier, the spread was wider — 215 bps on April 2, when the 30-year hit its 2026 peak at 6.46%. That's deep into "elevated" territory. The pre-pandemic 2015–2019 average ran roughly 170 bps. Today's number sits nearly 30 bps above that norm.

The spread moves independently of the underlying Treasury. Investors demand a premium to hold mortgage-backed securities rather than risk-free government paper. When that premium widens, the Treasury can fall and the mortgage rate barely follows.

The Context

This matters because the bond market has been volatile. The 10-year ran from 3.97% on February 27 to 4.44% on March 27 — a 47 bp surge — and is now at 4.32, only partway back down. Every analyst watching rates assumed that if the 10-year eased, the 30-year would fall in lockstep.

It hasn't. Bill McBride at Calculated Risk has been flagging the spread persistence for months. He's right to. Here's the math that investors should internalize: if the 10-year falls 25 bps from here, and the historic spread of 170 bps holds, the 30-year should land at ~5.77%. But at today's 198 bp spread, it lands at ~6.05%. That's a 28 bp gap sitting in the markup.

On a $300,000 30-year loan, 28 bps is roughly $52/month — or $18,720 over the life of the note. That's not noise. That's a structural tax being withheld from the rate rally buyers have been waiting on since Friday's rate-relief brief.

Also Moving

• Existing home sales fell 3.6% MoM to 3.98M SAAR in March — the weakest March print since 2024. (FRED EXHOSLUSM495S)
• Months of supply jumped to 4.1 from 3.8 — Friday's buyer-window brief covered the listings acceleration
• Unemployment ticked down to 4.3% from 4.4% in February. Labor holding, but rates aren't following. (FRED UNRATE)

The Investor Read

The spread is your underwriting constant, not the rate. If you've been modeling a 30-year drop to 5.75% based on a Treasury rally, you need to shave that to 6.00–6.10% until spreads compress. Spreads compress when mortgage-backed securities become attractive relative to Treasuries — typically when prepayment risk stabilizes or the Fed signals quantitative easing. Neither is imminent.

For deals you're underwriting this quarter: stress-test the cash-flow at 6.50% financing. If the deal still pencils, the spread is your friend — competing buyers are modeling to 5.75% and will fall out of escrow when their lender quotes 6.15%. For deals you already own: the spread doesn't help you refi in 2026. Plan for your current rate to be the rate you hold through 2027.

What's your refi trigger — a specific rate, or a specific spread? Hit reply, I read every one.