Mortgage-Backed Securities Insights — Week of August 24, 2026

Hi, I'm Jerry Levy, Managing Director of Texas Capital's Mortgage Securities Sales and Trading.

It is Jackson Hole week, as well as the last week of August and the last week of the traditional homebuying season. Lock in/lock out constraints remain. Only 3% of conventional mortgages have a 50 basis point incentive to refi this morning, with 6.70 to 6.80 30-year rates. Refi activity is down 55% from the February high and back to the levels last seen in June/July of 2025. That was before the rate rally. Purchase activity is in line with 2025. As a percentage of all mortgage applications, refis still represent 42% of applications.

How is this possible? Because purchase activity remains muted as well as the percentage of homes being purchased without a mortgage has reached 28% this year, which is up from 26% last year, 20% in 2024. And, when I bought my first home, it was under 10%.

Chairman Warsh will be speaking at Jackson Hole this Friday. That will be our opportunity to learn what the path will be for the Fed in 2026. I believe he will say that the Fed's policy is, "Don't become the market," which will cause some friction with the activist and interventionist policies of President Trump — lower rates, lower rates now — and Treasury Secretary Bessent, who reintroduced Treasury Twist from the historical lexicon of Treasury tools, yield curve control and quantitative easing when he announced his buyback program last week of long-dated U.S. treasuries. If Bessent indeed changes the composition of Treasury issuance by issuing in the front to manipulate the back end, we are returning to the Janet Yellen policy of 1953-style debt management. 

The key is how does Warsh and the Fed back that target by promising unlimited purchases, aka fiscal dominance, and face the 1953 issue, which was the Fed trying to eliminate but giving the Fed a PUT to investors in the same way investors relied on the Greenspan PUT and the Powell PUT. In 1946 to 1951, the U.S. Treasury said what bond yields should be, and the Fed enforced it. In 1951, an accord was reached that gave the Fed back its independence, but by 1953 there was a cost to Fed intervention, a loss of control of the money supply, inflation and a depreciating currency. Sound familiar? Last week we saw the dollar depreciate; the price of oil, gold and bitcoin spike; and yields sold off back to the levels pre Bessent's Twist announcement. 

1953 is the historical precedent of our modern QE/yield curve control debate. We have seen and had interventionist presidents, Treasury secretaries and Fed Chairman. Nixon-Burns, Bush-Paulson, Trump-Mnuchin/Powell, Truman-Martin/Sproul in 53. Don't let recency bias fool you. And listen carefully to Chairman Warsh on Friday from Jackson Hole. Thank you for listening. Please go to Texas Capital's LinkedIn page for all our updates. Until next time.