Portland Mortgage Market Update — October 10, 2025

With the Shutdown still firmly in place, the market had to look abroad for news that might impact rates. At the beginning of the week we were focused on news out of Japan, whose new Prime Minister appears to be someone who is in favor of more fiscal and monetary stimulus. Japan is already on the brink of a debt crisis as it is estimated that its debt to GDP ratio is somewhere around 240%, which means Japan has the biggest debt burden by a wide margin in the developed world and is twice what the US is at. So more economic stimulus might spur economic activity long term, in the short term it would exacerbate things for them and as result their treasury yield equivalents rose to the highest level since 2008. We are living in a global economy so ours followed suit (although not as drastically) and rates worsened as a result.

The Fed minutes from the last meeting were released this week, and it showed a Fed divided. Most were in favor of more easing (cuts) this year, but there was some discrepancy on what the "Neutral" rate should be. The Neutral rate is what is kind of like Goldilocks, not too hot/high that it kills the labor market and not too cool/low that it spurs inflation. Puzzlingly, there are still some Fed members thinking the labor market is either "solid" or "strable". This is despite 3 of the last 4 ADP report showing job losses, massive revisions to the BLS reports, and over 150K federal employees taking the buyout last week which will impact future reports. ALSO, while the Fed went out of its way to mention the potential impacts of AI in their minutes, they apparently haven't realized its biggest threat which is its potential to replace human labor. Regardless, the market is still betting on a 95% chance for another rate cut at their meeting on the 29th, and an 80% chance for another cut at their December 10th meeting.

Some fresh blood will be joining the Fed soon! Secretary Scott Bessent announced today that the lists of potential replacements for Chairman Powell has been trimmed from 11 to 5. The name raising eyebrows most would be Blackrock Fixed Income CIO Rick Rieder. Rieder is considered a longshot to win the role, but his inclusion signals that on of the criteria for the next Chairman would be to shrink the Fed which has been accused of "mission creep" with what it sees as its responsibilities. The interview process is expected to wrap up after Thanksgiving and a decision made before year end.