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.

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ABOUT Meg Richardson Meg Richardson is a writer specializing in markets, technology, and personal finance. She loves breaking down seemingly complex ideas and making them readable and interesting for everyone. She holds an MFA in writing from Columbia University. When she is not writing about finance, she enjoys running in Central Park and drawing cartoons.

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