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Mortgage rates drop despite bond market turmoil: Why rates may rise again in coming weeks
Mortgage rates fell slightly despite bond market volatility. Here’s why Treasury yields, inflation, the US deficit and oil prices could push rates higher.
Mortgage rates fell slightly last week despite a big jump in bond market volatility. The average 30-year fixed mortgage rate was 6.65% this week through Wednesday, down from 6.67% a week earlier, according to Freddie Mac. The small drop came during a very unstable week for the bond market. Long-term US government bond yields moved sharply as investors worried about inflation and the country’s growing budget deficit.
The 30-year Treasury yield reached its highest level since 2007. Long-term government bond yields briefly moved above 5.3% on Tuesday, their highest level in 19 years, as investors became more concerned about inflation and the US fiscal deficit, according to Yahoo Finance. The Treasury then stepped in to support the bond market.
On Wednesday, the US Treasury said it would double the size of its long-term bond buyback program. The move was aimed at supporting bond prices and bringing interest rates lower. Bond yields fell sharply after the Treasury announcement. However, the calm did not last for long. Yields moved higher again on Thursday, showing how nervous investors remained about the bond market.
Why did mortgage rates fall?
Deep Dive
Mortgage rates don’t move in lockstep with the 30-year Treasury yield. Instead, they tend to track the 10-year Treasury yield more closely because most homeowners don’t hold onto the same mortgage for the entire 30-year term. Many sell their homes or refinance well before the loan matures, making the 10-year yield a more useful indicator for where mortgage rates are headed.
