You probably saw the headlines. The 10 year treasury yield just hit a 19 year high. So why aren't mortgage rates at a 19 year high too? That's the question I want to answer this week.

Treasury Yields and Mortgage Rates Move Together, Mostly

Mortgage rates and treasury yields usually move in sync. You can see that in the chart I put together. They track each other pretty closely most of the time.

But right now, mortgage rates are not at a 19 year high. There's a gap. And that gap comes down to something called the spread.

Why the Spread Between Rates and Yields Changes

Sometimes that spread tightens. That happens when investors buy more mortgage bonds than treasuries.

One good example: Fannie and Freddie bought back $200B in mortgage bonds back in January of this year. If you look at the chart, you'll see the spread between mortgage rates and treasury yields get a little closer from December to January.

So the relationship is real, but it's not one to one. That's why treasuries can hit a 19 year high while mortgage rates lag behind.

What's Actually Moving Rates This Week

A few things pushed yields higher this week:

  • Inflation reports and global manufacturing reports came out showing the economy and inflation are still strong.
  • Comments from Iran fueled the spike. Iran said it would never bow its head to the US and will not accept limits on its nuclear program.
  • Comments from Fed Governor Michael Barr also spurred bond selling. He said further rate hikes are likely to be needed to ensure inflation comes down to target in a timely fashion.

Because of all this, chances of a rate hike in October are increasing.

This Week's Market Close

  • UMBS 6.0: 98.84
  • 10 Year yield: 5.160
  • Average rate (Mortgage News Daily): 7.43%

Oil and Mortgage Rates

I also put together a chart showing oil and mortgage rates. Sometimes they move together. Not always. Just thought it was interesting to explore.

If rates like these have you wondering what you can actually afford right now, run your numbers through the affordability calculator. And if you want to see how a rate move like this changes your monthly payment or closing costs, check the payment and closing cost calculator.

What's Next

Next week we have PCE data and jobs data. Both could move rates again. I'll be watching.

Talk to you next week.

Sam Thompson
NMLS ID 1052267

19-Year High on the 10 Yr Treasury: Why Mortgage Rates Differ
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Originally shared by u/SamTMortgageBroker in r/NewbHomebuyer — view the original thread.