How The 10-Year U.S. Treasury Note Impacts Mortgage Rates (2024)

FAQs

How The 10-Year U.S. Treasury Note Impacts Mortgage Rates? ›

As bond prices go up, mortgage interest rates go down and vice versa. This is because mortgage lenders tie their interest rates closely to Treasury bond rates. When bond interest rates are high, the bond is less valuable on the secondary market. This causes mortgage interest rates to rise.

Factors that influence mortgage rates

Fixed-rate mortgages are tied to the 10-year Treasury yield. When that goes up or down, fixed-rate mortgage rates follow suit. The fixed mortgage rate isn't exactly the same as the 10-year yield, however; there's a gap between the two.

When the Fed makes it more expensive for banks to borrow by targeting a higher federal funds rate, the banks, in turn, pass on the higher costs to their customers. Interest rates on consumer borrowing, including mortgage rates, tend to go up.

Interest rates and bond prices have an inverse relationship. When interest rates go up, the prices of bonds go down, and when interest rates go down, the prices of bonds go up.

Lenders typically set their rates based on the return they need to make a profit after accounting for risks and costs. The Federal Reserve doesn't directly set mortgage rates, but it does set the overall tone. The closest proxy for mortgage rates is the 10-year Treasury yield.

10 Year Treasury Rate is at 3.68%, compared to 3.65% the previous market day and 4.25% last year. This is lower than the long term average of 4.25%. The 10 Year Treasury Rate is the yield received for investing in a US government issued treasury security that has a maturity of 10 year.

Considered one of the lowest-risk investments on the U.S. market, 10-year Treasurys are a “risk-free” benchmark against which other investments and debt are compared. (Three-month Treasury bills are another.) While no investment is ever completely risk-free, Treasury notes come close if held to maturity.

When there's uncertainty in the market, investors buy Treasury bonds, which in turn drives yields (and mortgage rates) downward. This can lead to day-to-day rate swings as news comes in. Learn more: How are mortgage rates set?

Over 30 years, the difference would save you $65,691 in interest. Buying power boost: If you budgeted about $1,846 a month for a mortgage payment, and the interest rate dropped 1 percentage point — from 7% to 6% — you could spend about $30,480 more on a home without increasing your monthly payment.

Lawrence Yun, chief economist at the National Association of Realtors, even told CNBC last year that he doesn't think mortgage rates will reach the 3% range again in his lifetime.

What does it mean when a 10 year Treasury yield goes up? ›

The yield on the 10-year Treasury is a key indicator of investor sentiment about the economy's future health. A rising yield often suggests that investors expect stronger economic growth and higher inflation which prompts them to demand higher returns.

10-2 Year Treasury Yield Spread is at 0.09%, compared to 0.04% the previous market day and -0.71% last year. This is lower than the long term average of 0.86%. The 10-2 Treasury Yield Spread is the difference between the 10 year treasury rate and the 2 year treasury rate.

The US 10 Year Treasury Bond Note Yield is expected to trade at 3.88 percent by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, we estimate it to trade at 3.81 in 12 months time.

When hammering out mortgage details with a lender, you can — and should — negotiate your mortgage rate. Regardless of what the current mortgage rates are on the lender's website, don't assume they can't go lower. You'll likely pay a higher rate if you accept the first offer you're presented.

The US 10 Year Treasury Bond Note Yield is expected to trade at 3.88 percent by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, we estimate it to trade at 3.81 in 12 months time.

We sell Treasury Notes for a term of 2, 3, 5, 7, or 10 years. Notes pay a fixed rate of interest every six months until they mature. You can hold a note until it matures or sell it before it matures.

You can sell a 10-year Treasury note anytime after holding it for a minimum of 45 days, but the full face value of the investment is only guaranteed if you hold it to maturity. Remember, market prices and yields vary daily, so you may sell at a loss if you don't have the note until the end of its term.