Mortgage rates jumped up again this week as concerns over the growing US debt re-emerge. The Federal Reserve Beige Book, released this week, pointed to a slowing US private sector – a sign that inflation could slow. But while slower consumer spending is expected to pull economic growth and inflation lower, rising government deficit spending could offset this drag.

Long-term interest rates depend on productivity and demographics, as well as the supply and demand for safe assets like US Treasuries. A growing imbalance between the supply and demand for US Treasuries will likely put upward pressure on long dated yields – like the 10-year Treasury yield – that mortgage rates tend to follow.

Expect more rate volatility ahead as the Fed and investors wait for more conclusive evidence of a return to low, stable and more predictable inflation. This week’s PCE inflation report will likely cause some repricing activity.