Yun: Reducing spending brings down interest rates

All right. So let's break this down really quick. I'm going to set you up here. So your idea is that Vivek Ramaswamy and Elon Musk, they could help housing costs, which is basically mortgage rates, if they reduce the national deficit and that would lower bond yields. I'll let you take it from there the rest of the thesis. Well, you know, we have seen the Federal Reserve already cut rates by 75 basis points, but the 10-year treasury yields have been rising. So the Federal Reserve is not lowering the mortgage rate. And the reasoning for that could be that we have very high budget deficit, large debt to continue to grow by $2 trillion a year. So if somehow the government spending can be reduced, because we know that President Trump will extend his tax cuts. So the tax cut, there would not be a possibility of a tax increase. So only way to reduce the debt level is to reduce government spending. And we have Elon Musk, along with Vivek Ramaswamy, looking for ways for spending, reduce it. So with less government borrowing need, that means there will be more private capital, including mortgage lending available in the market to bring down those interest rates. OK. So there's a couple of ifs in there, I think, in all fairness, Lawrence, that a couple of things have to happen. But also, I think the important thing to point out, as you mentioned, the Fed has cut rates, but still we've seen the 10-year go higher. A lot of that has to do with investors and bonds and their views on some of the Trump policies. One of them is the deficit. The other one is potential tariffs and the inflationary impact. So what happens if the 10-year continues to go higher? Do you believe even if Elon Musk and Vivek Ramaswamy cut government spending and things and the 10-year moves higher, does that still lower mortgage rates? Because they're not actually tied together. It's kind of they move together, but they're not directly tied together. So I just want to kind of spell that out again, because I know I'm throwing a lot at you. OK, go ahead. I'll let you go. I apologize. Well, you know, certainly, Tara, we have to wait and see what degree, how much of a magnitude of an impact, because it will be inflationary in the short term. But if there is a long term credible plan. So it's not about reducing budget deficit in a single year, but a credible plan to reduce deficit over time that will bring down the 10-year treasury yield, which consequently will lower the mortgage rate. As you said, mortgage rates are much more tied to the 10-year treasury. Now, there is a little misalignment between 10-year treasury and 30-year fixed rate mortgage at the moment. Historically, the spread between the two rates would be about 200 basis point or even lower. Right now, it's about 250 basis point. So if the market become more confident about the direction of the economy, along with the budget deficit situation, I think there will be a narrowing in the spread between 10-year treasury and mortgage rate, which also helps bring down that mortgage rates for consumers. You know, Lawrence, one other thing to mention, and I think you probably have the answer and some of the data behind this. We have so much demand for housing here in the United States. Depending on the estimate, we're at a shortfall of at least 2 million. People continue to buy houses with these higher mortgage rates. How does supply and demand play a part of this? If I'm giving out mortgages, why would I lower the rates, even if the 10-year goes lower, if people keep buying houses? Well, you know, there's always the dream of the ownership because we know that vast difference in wealth between homeowners and renters. So the demand will always be there. It's a question of supply. So we need to assure that supply continues to increase. And so anything to bring about more supply, whether turning a slice of federal land or more home building, or whether reducing some regulation for home builders to get more active into the marketplace, maybe consider changing the zoning law. So we have to consider supply. But at the moment, even at the elevated mortgage rates, we have buyers, but these are high-income buyers. We need more moderate income, first-time buyers to get into the market. And that's where mortgage rates play much important role. So if we want to establish American dream for more people, we need to assure that mortgage rates steadily get slower. And part of that is reducing the budget deficit.