It was over a week ago when Treasury Secretary Scott Bessent spoke about a program to purchase longer-dated, less-liquid Treasury securities in an effort to provide liquidity and improve market functioning.

The stated purpose is important. When certain portions of the Treasury market become less liquid, purchasing those securities can potentially help improve market functioning. But there is another part of this story that has captured the attention of the bond market.

Many viewed the proposal as an attempt to help lower longer-term interest rates.

That distinction is enormously important for mortgage and housing professionals. We spend a lot of time talking about what the Fed may or may not do with short-term rates, but mortgage rates are much more closely tied to what happens farther out on the bond yield curve.

If Treasury purchases ultimately provide additional demand for longer-dated securities, that is something the bond market and certainly the mortgage industry will be watching closely.



This is not the same thing as the Fed cutting rates or launching a traditional monetary easing program. But anything that could affect demand, liquidity and pricing at the longer end of the Treasury market deserves our attention.

July Core PCE showed inflation rising roughly 0.2% for the month, which equates to an annualized pace near 2.4%. That is much closer to the Fed’s goal of 2.00% inflation.



But the headline doesn't tell the entire story.

An interesting component buried underneath the inflation data was portfolio management fees. The July Producer Price Index showed an enormous 6.5% increase in portfolio management fees. These fees ultimately bleed into Core PCE and they had an outsized impact on July's reading.

Of the roughly 0.2% monthly increase in Core PCE, approximately 40% came from portfolio management fees.

Think about that.

Nearly half of the monthly increase came from one category and portfolio management fees are hardly the type of inflation that can be cured by keeping interest rates higher.

This is why not all inflation is created equal.

It is also why we have to look beneath the headline numbers when determining whether inflation is truly becoming problematic. Higher interest rates can influence demand and certain areas of the economy, but they cannot effectively combat every individual component that happens to push an inflation index higher.

From that perspective, July’s Core PCE report certainly doesn’t scream that higher interest rates are needed.

Oil prices have also moved into the lower $80s as optimism surrounding Iran has helped reduce some of the immediate fears of military conflict.



That matters because geopolitical uncertainty can quickly add a risk premium to energy prices. If those concerns remain contained, lower oil prices would be another welcome development on the inflation front.

Energy can influence both actual inflation and inflation expectations, making oil an important market to watch alongside bonds.

Be sure to look at the chart below. Bond prices appear to be setting up for an important move.

On the positive side, prices have an opportunity to move above the 50-day moving average for the first time in quite some time. A sustained move above that level would be an encouraging technical development and could open the door for further rate improvement.

But there is another side to this setup.

If bond prices fail to break higher, we remain vulnerable to making fresh 2026 price lows.



Remember: bond prices and yields move in opposite directions. New lows in bond prices would mean higher yields and could usher in fresh 2026 mortgage rate highs.

30-Year Fixed Mortgage Rate (Freddie Mac daily average, August 27, 2026)

• Rate: ~6.66% (current average 30-year fixed rate)
• Change from Previous Week: up from ~6.65% (week ended August 20, 2026)
• Change Year-over-Year: up from ~6.56% on August 28, 2025 (Freddie Mac)

10-Year Treasury Note Yield (daily close, August 27, 2026)

• Yield: ~4.65%
• Change from Previous Week: down from ~4.69% (week ended August 20, 2026)
• Change Year-over-Year: up from ~4.24% on August 27, 2025

As we move closer to the September Fed meeting, attention now shifts directly toward the labor market side of the Fed's mandate.

This week we'll receive several important reports, including ADP, JOLTS and, of course, the official Jobs Report.



No single report will tell the entire story. But collectively, these numbers should give markets another important read on the direction and momentum of the labor market at a particularly important time.

And considering where bond prices are sitting technically, the timing couldn't be much more interesting.

Markets will also continue digesting Kevin Warsh's Jackson Hole speech from last Friday and determining what his message means for the path forward.

Put it all together and we have the ingredients for an important week: bond prices threatening a technical breakout, fresh labor market data arriving ahead of the September Fed meeting, and markets continuing to digest the message out of Jackson Hole.