Treasury Market and Mortgage Rates
Treasuries and Mortgage Rates
Yields on 10-year and 30-year Treasury securities are typically used to set long-term mortgage rates. Loans with short initial terms (1-, 3-, and 5- year ARMs, e.g.) are pegged to shorter-term securities. So when bond yields drop, typically, conventional mortgage rates fall as well (see historical graph below). Conversely, when yields rise, so do mortgage rates. Why? If a lender chooses to sell your mortgage loan to an investor, the lender will likely use Treasury yields as a benchmark for value. |
30
Year T-Bond vs. 30 Year FRM, Prime Rate, 1977 - 2007 { Obtaining Permission to Reproduce }
Treasury Yield Curve
The Yield Curve - the yields of U.S. Treasury bill, notes and bonds - can reveal a lot about markets. The "usual shape" of the yield curve is positive; that is, with short term rates lower than long term. Almost all recessions have been preceded by an inverted curve (with short term rates higher than long term), and such a curve usually points to lower rates in the future. A steeply positive curve points to future higher rates. |
![]() Treasury Yield Curve |
![]() Treasury Yield Curve |
Quotes: 30 Yr T-Bond, 10 Yr T-Note, 5 Yr T-Note (Yahoo! Finance)
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News: News on Mortgages and Treasuries The Latest Rate News Treasury Yield Curve Dynamics |
Reuters.com: Latest Treasury Bond News and Financial Information: ( today.reuters.com/investing/financebonds.aspx ) Bloomberg.com: Rates & Bonds: ( www.bloomberg.com/markets/rates/ ) |
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