How Does The 10 Year Treasury Affect Mortgage Rates

How inflation, economic growth, Federal Reserve activity and the housing market affect mortgage rates.. the average spread for MBSs above the 10-year Treasury bond yield is approximately 1.7%.

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The Dangers of Buying an Annuity When Interest Rates are Low Interest rates are the raw material used in manufacturing annuities. rates are currently very low–the 10 year treasury note is hovering around 3.4 percent and 30 year mortgage rates are now less than 5 percent.

The 10-Year Treasury Note is a false indicator for current mortgage rates. It’s good for long-term trend lines but terrible for guessing today’s live rates.

The ten-year is used as a proxy for many other important financial matters, such as mortgage rates. This bond, which is sold at auction by the U.S. government, also tends to signal investor confidence. When confidence is high, the ten-year treasury bond’s price drops and yields go higher.

Treasury yields only affect fixed-rate mortgages. The 10-year note affects 15-year conventional loans while the 30-year bond affects 30-year loans. When Treasury rates rise, so do rates on these mortgages. Banks know they can raise rates once their primary competitor does.

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A discussion of Mortgage Backed Securities and their affect on mortgage rates.. – Current Mortgage Rates – 30 Year Fixed Rate Mortgage. The benchmark competitor is the US 10 year treasury.

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Most homeowners payoff their 30-year mortgages within 10 years as a result of refinancing or selling their homes. Consequently, investors compare 30-year mortgages with 10-year federal treasury bills rather than 30-year federal debts. As low risk instruments, the rates on 10-year treasuries are usually lower than rates on other debt securities.

At the same time, the the average overall 30-year fixed mortgage rate rose from about 5.29% to 5.41%, a rise of only 12 basis points. Over time, there are any number of examples where Treasury yields have risen faster than mortgage rates, as well as times when mortgage rates rose faster than Treasury yields.

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 · Regression Analysis: Residential Rates as a Function of 10-Year Treasury Rates and Whether There is a Recession The second regression models 30-year rates (again, a simple linear model) but includes both 10-year Treasury rates and a dummy variable of one when a recession is present and zero when there is no recession.