10-Year Treasury Yield Surges To A 12-Month High Rising Rates

10-Year Treasury Yield Surges To A 12-Month High Rising Rates

Gustan Cho Associates are mortgage brokers licensed in 48 states

This Breaking News Article Is About 10-Year Treasury Yield Surges To A 12-Month High Rising Rates

The 10-Year Treasury Yield Surges to a 12-month high on Tuesday, February 18th signaling potential economic bad news for what lays ahead. The 10-Year Treasury Yieldskyrocketed signaling inflation, higher mortgage rates, and a slowdown of the booming housing market. Traders shied away from long-term government bonds on Tuesday. Traders shied away from long-term treasuries despite positive economic expectations due to the COVID-19 vaccines and positive economic outlook with the $1.9 trillion-dollar economic stimulus package. The housing market has been surging for the past seven years without any correction. Many homebuyers were priced out of the market.

Skyrocketing Home Prices Since 2013

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Both HUD and the Federal Housing Finance Agency (FHFA) have been increasing FHA and Conforming loan limits for the past five years. This year after year increase in the FHA and Conventional loan limits was due to skyrocketing home prices. Many homebuyers have been priced out of the housing market due to rising home prices. The cost of building materials at superstores like Home Depot and Lowes has nearly doubled in the past 12 months. Will the 10-year treasuries surging in one day to a 12-month high be a sign of bad economic times ahead?

10-Year Treasury Yield Surges 9.9 Basis Points To A One-Year High 

The 10-Year Treasury Yield Surges 9.9 basis points on Tuesday to a 12-month high of 1.298%. This was the single biggest day increase in the past year. The 2-year note rate surged 1.2 basis points to 0.121%. The 30-year bond has skyrocketed 8.6 basis points to yield 2.089%. Bond prices have plummeted due to the surge in the yield on Treasuries. The margin spread between the 2-year and 10-year yields widened by 1.18 points, marking its widest spread in the past 48 months. The main reasoning for the surge in Treasury yields was due to investors selling bonds due to concerns over inflation when the economy recovers from the coronavirus pandemic. The economy is recovering at a faster than expected pace. This is mainly due to the federal government injecting trillions of dollars into the economy and interest rates at zero percent. Biden’s sudden unexpected executive orders have increased energy prices and are likely to undo many of President Donald Trump’s economic strengths in the United States. Many experts are expecting a stock market crash. The injection of trillions of dollars into the coronavirus stimulus package is likely to trigger inflation and higher rates in the coming months.

10-Year Treasury Yield Surges And What Experts Are Forecasting

Many experts think a correction in the markets, especially the stock and housing markets, is warranted and expected. Nothing can keep on going up and up without a correction. This is how the stock and housing market has been for the past several years. Right now, there is a housing crisis where many homebuyers are priced out of the high home prices. The number one factor triggering the housing market is demand versus supply.

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Other experts such as Kansas City Fed President Esther George do not seem concerned by the sudden spike in long-term Treasury yields. Esther George thinks the volatility on the long-term Treasury yields is just temporary with no long-term devastating effects to the U.S. economy.

Fear Of Inflation Triggers Surge In Long-Term Yields On U.S. Treasury

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While many experts are shrugging off the surge in yields of the Treasuries, others are showing a deep concern on the end of the bull market. Others in the housing industry are showing signs of concern. Many in the mortgage industry are afraid that this can be the beginning of the end of historic mortgage rates.  Many who have forecasted mortgage rates to remain at their current historic low levels seem dumbfounded and confused. Will this be the end of the everlasting housing boom? Will there be a housing correction in the coming months? Will interest rates go up and therefore mortgage rates follow? Concerns about inflation can plummet the Stock Markets. How bad will the next housing correction be? Home prices have been skyrocketing for the past seven years. Will the Federal Reserve Board be increasing interest rates to control inflation? The sudden surge of long-term yields on the U.S. Treasury was unexpected and hit everyone from left field. This is a developing story. The team at Gustan Cho Associates will keep our viewers updated on new development in the coming days and weeks.

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