10-Year Treasury Yield Declines Amid Economic Worries
Borrowing Gets Cheaper
The yield on the 10-year US Treasury continued to decline this week, reaching a level not seen since February. The slide is happening even as inflation rises and the Federal Reserve reins in its pandemic stimulus activities.
Investors and economists had expected the yield on the 10-year Treasury to increase this year as the economy rebounded after more than 12 months of pandemic restrictions. For borrowers, particularly those looking to purchase a home, this will likely translate to a decline in rates. Typically the 10-year Treasury is 150 to 200 basis points more than the 30-year mortgage rate.
Fed to Ease Stimulus Measures
Last week the yield on the 10-year Treasury slipped 5 basis points to 1.318% while the yield on the 30-year Treasury fell 6 basis points to 1.93%. The decline came as the Fed published the minutes from its June meeting in which it talked about reducing its bond-buying activities but also expressed the need to make changes gradually.
Ending the Fed’s purchase of $120 billion in Treasury and mortgages each month could signal the economy is on the mend. It may also mean the Fed is gearing up to raise interest rates. Some investors think the removal of Fed stimulus will push short-term rates higher while worries about a slowdown in the economy will drive long-term rates lower.
Mortgage Rates Fall in Lockstep
A byproduct of the declining Treasury yield is a dip in mortgage rates. For the week ending July 8, rates on home loans fell to their lowest level since February. The 30-year fixed rate mortgage averaged 2.9%. Just two weeks ago the rate was above 3%. With optimism about economic recovery ebbing, mortgage rates are expected to stay near historic lows in the weeks to come. That could drive more homebuyers off the sidelines.
Investors may be bracing for a slowdown in the economy, but with Treasury yields declining and mortgage rates following, it just got even cheaper to borrow money. It will be interesting to see what impact this has on the real estate market over the next few months.
Waiting around for a good mortgage rate can make you feel a little like a ballplayer who’s been warming the bench—except there’s no coach to tell you when to get in there and play. This drop could signal that it’s time to step on the court and start the mortgage review process. If you’ve been on the sidelines waiting to hop in, now might be time to consider refinancing your mortgage. Check your rate in two minutes to get started.
Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Adviser
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.
SOSS21071202
All your finances.
All in one app.
App Store rating
