The bond selloff is pushing mortgage rates back to 7.5 percent

The 10-year Treasury yield crossed 5.2% on Monday, mortgage rates hit 7.5%, and Georgia suspended its gasoline tax. At the same time, Treasury Secretary Scott Bessent brought veteran Wall Street economist David Zervos into the Treasury Department.

Those are separate events. Together they show how the rise in long-term borrowing costs is moving from the bond market into household budgets and government policy.

The 10-year Treasury yield reached 5.23% Monday, its highest level since 2007, according to Associated Press market data. The S&P 500 fell 0.8%, while the Nasdaq dropped 0.9%. Oil prices were also rising as the Iran war continued to disrupt tanker traffic through the Strait of Hormuz.

Reuters reported that the 10-year yield has now broken above 5.15%, a level it had not sustainably crossed in years. The move has been driven by several forces at once: higher oil prices, inflation concerns, solid U.S. growth, government borrowing and debt-financed corporate investment in AI.

Then the mortgage market followed.

Mortgage News Daily put the average 30-year fixed mortgage rate at 7.50% on Sept. 28, up from 7.43% on Friday and 6.38% a year earlier. The weekly Freddie Mac measure was already above 7%.

That is a very different rate environment from the one many buyers were expecting at the start of 2026.

Mortgage rates had fallen below 6% in February before the Iran war pushed oil prices and inflation expectations higher. The resulting rise in Treasury yields eventually fed through to mortgage borrowing costs.

Now the pressure is appearing in state policy.

Georgia Gov. Brian Kemp declared a state of emergency Monday and suspended the state’s motor-fuel tax for 30 days beginning Sept. 29.

The tax normally adds 33.3 cents per gallon to gasoline and 37.3 cents to diesel. Georgia’s reported average prices were $4.19 for gasoline and $6.24 for diesel. The executive order also temporarily suspends weight restrictions on commercial trucks, with the stated goal of reducing transportation costs.

The timing matters.

A household facing a 7.5% mortgage is dealing with a higher financing cost. A trucking company buying $6.24 diesel is dealing with a higher operating cost. Georgia is now using tax policy to absorb part of the fuel shock.

And Treasury is making its own adjustment.

On Sept. 28, Bessent announced that David Zervos, former chief market strategist at Jefferies, would join Treasury as a counselor. Zervos has spent 35 years working in financial markets, central banking and macroeconomic analysis, including previous work at the Federal Reserve.

The appointment comes while the long end of the Treasury market is moving sharply higher.

Zervos has also publicly supported Treasury’s efforts to buy back longer-dated government debt and has argued for lower interest rates.

That does not mean Treasury can simply order long-term rates lower.

The 10-year yield is determined by the market. Mortgage lenders price off longer-term funding conditions. Oil prices feed into inflation expectations. Federal Reserve policy affects the short end, but a Fed rate cut does not automatically produce cheaper 30-year mortgages.

That distinction is becoming harder to ignore.

The Fed can influence overnight borrowing costs. Treasury can change its debt issuance and buyback strategy. States can temporarily suspend taxes. None of those actions directly removes the forces pushing the long end of the bond market higher.

For now, the number sitting in front of homebuyers is 7.5%.

The number sitting in front of Treasury traders is 5.23% on the 10-year.

And in Georgia, the response to $4.19 gasoline and $6.24 diesel is already a temporary tax holiday.

The cost of money is moving through the economy one market at a time.