Global Fixed Income Strategy - October 2025
Global macro strategy
National housing emergency: Policy options and
As the US housing market continues to evolve in the wake of the COVID-19 pandemic, affordability remains a central concern for policymakers and households alike. In recent comments, Treasury Secretary Scott Bessent stated that the administration may soon declare a national housing emergency. According to Bessent, “Everything is on the table” to alleviate a structural affordability crisis that has significant macroeconomic and political implications.1
The case for a national housing emergency
The magnitude of the housing affordability crisis is clear. Home prices surged in the post-pandemic era as low mortgage rates and remote work stoked demand. When mortgage rates climbed to multi-decade highs in 2022, monthly payments as a percentage of income on new loans soared, putting homeownership out of reach for many Americans. The landscape has been especially challenging for younger households – according to the National Association of Realtors, the median first-time buyer age increased to 38 in 2024 from 30 in 2010.2
While anticipated rate cuts by the Federal Reserve (Fed) may alleviate some of the pressure by lowering borrowing costs, officials acknowledge that monetary policy alone is insufficient. The administration is likely to consider a range of policy tools to cut costs and boost supply for prospective buyers.
Is there a supply crisis?
Although the narrative of a “housing shortage” remains prevalent, the reality is more nuanced. The absolute level of national housing inventory remains low by historical standards, with just 1.4 million properties listed for sale as of August 31, according to Zillow. Supply varies dramatically by location, however, with many metro areas now experiencing inventory in excess of pre-pandemic levels. In terms of months of supply, which views listings through the lens of existing demand levels, the shortage is much less acute. Weak demand has restored balance to the market for existing homes at the national level, with approximately 4.6 months of supply.3 Meanwhile, months of supply of new homes has risen to 9.2, moving it squarely into a buyer’s market as builders increasingly rely on incentives to maintain sales.4 Despite debate about the extent of the supply shortage, the administration remains likely to focus on easing barriers to construction, particularly for entry-level homes.
Investment risks
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
Fixed-income investments are subject to credit risk of the issuer and the effects of changing interest rates. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa. An issuer may be unable to meet interest and/or principal payments, thereby causing its instruments to decrease in value and lowering the issuer’s credit rating.
Non-investment grade bonds, also called high yield bonds or junk bonds, pay higher yields but also carry more risk and a lower credit rating than an investment grade bond.
Mortgage- and asset-backed securities, which are subject to call (prepayment) risk, reinvestment risk and extension risk. These securities are also susceptible to an unexpectedly high rate of defaults on the mortgages held by a mortgage pool, which may adversely affect their value. The risk of such defaults depends on the quality of the mortgages underlying such security, the credit quality of its issuer or guarantor, and the nature and structure of its credit support.
The risks of investing in securities of foreign issuers, including emerging market issuers, can include fluctuations in foreign currencies, political and economic instability, and foreign taxation issues.
The performance of an investment concentrated in issuers of a certain region or country is expected to be closely tied to conditions within that region and to be more volatile than more geographically diversified investments.
