Today's Scoop:

Hey friends - Make sure to catch up with our Weekly Scoop, and don’t miss our Explained about whether companies can handle workers’ demands.

Check out our new Company Scoop format below!

Here’s what you need to know today…

1. It’s never been a worse time to buy a home.

2. Record Americans are falling behind on car payments.

3. The government’s budget issues keep getting worse.

S&P 500: 4,217.04
1Mo: -3% | 1Yr:1% | 5Yr: +59%

The market wavered lower today as rising interest rates ate away at investors' confidence. The yield on the 10-year Treasury rose above 5%, pushing borrowing costs to the highest in decades for homes, cars, and pretty much everything else. [🤓]

It’s never been a worse time to buy a home. Home affordability is at record lows compared to renting. A report from CBRE revealed the average monthly new mortgage payment is 52% higher than the average apartment rent, the most significant gap on record. With mortgage rates nearing 8% and a limited supply of available houses on the market keeping prices high, buyers have been deterred from making purchases. In theory, renting and buying should be evenly matched, but the previous biggest spread was 33% in 2006.

Americans are having trouble paying for their cars. According to Fitch Ratings, 6.11% of subprime auto borrowers were at least 60 days overdue on their auto loans in September, the highest rate on record over at least 30 years. This is mainly due to inflated vehicle prices and rising interest rates, making loans much less affordable. Already facing depleted savings and high borrowing rates in other areas of their finances, many Americans could face more delinquencies.

The US government keeps spending more money than it takes in, while borrowing costs rise. According to the Congressional Budget Office, the federal budget deficit for 2023 reached $1.7 trillion. This matters because when a government runs a deficit, it needs to borrow money to cover its expenses. While borrowing costs for the government have been nearly free for the past decade, they’re now rising considerably. Congress ousted its Speaker of the House last month after budget negotiations went sour, and it only has a few weeks to agreed to a spending package before the government shuts down.

(These links only work for 24 hours while the story is live.)

View company rankings based on your votes▶️

What are Treasuries and how do they affect borrowing costs?

The US government borrows money from public investors, just like companies do. They do this by issuing Treasury Bills (short term debt), Notes (2-10 year debt), and Bonds (10+ year terms), which are all collectively known as Treasuries. These are sold and traded by public investors, similar to stocks.

The yield on the 10-year Treasury note is like the bellwether index for the market. It's a key indicator that affects pretty much everything. Treasury securities are considered riskless investments because they are backed by the US government. So, they act as the benchmark for other types of borrowing like mortgages, student loans, credit cards, and more. The riskier the borrower, the higher the interest rate they'll have to pay. So, as Treasury rates rise, it means that all other borrowing costs will go up too.

But, just like the stock market, figuring out the exact cause of changes in interest rates isn't always straightforward. The main driver is the supply and demand in the market. When investors seek safety, yields tend to fall. The Federal Reserve's monetary policy also plays a big role, as they often buy or sell Treasuries to manipulate borrowing costs. And of course, shifts in concerns about fiscal deficits or anything that could shake the US government's reputation as a riskless borrower can also have an impact.