Bond “Carnage” hits Mortgage Rates, Aims at Housing Bubble 2, by Wolf Richter

The relationship between the housing market and higher interest rates isn’t as straightforward as many people think. Sometimes rates rise and the housing market does well for the same reason: the economy is strong. Interest rates probably hit bottom in July, 2016, and have embarked on a long-term rising trend. It remains to be seen how that will affect the housing market. From Wolf Richter at wolfstreet.com:

“Many fear the Fed is behind the curve. The market is even further behind: This is clearly a dangerous situation.”

US government debt took another beating today. As prices fell, yields rose to new multi-year highs. The 10-year Treasury yield rose 5 points to 2.625%, the highest since September 2014, when it just briefly kissed that level. At this pace, the yield will soon double from the record low of 1.36% in July last year.

This chart shows the progression of the 10-year Treasury yield since late August (chart via StockCharts.com):

When yields were surging maniacally in November and December – broadly called the “bond massacre” or the “bond meltdown” or similar – I pontificated that eventually yields would fall back some, “on the theory that nothing goes to heck in a straight line.” And they did start falling back in mid-December. But that three-month breather has now been totally undone.

Two-year Treasuries took it on the chin too today, and the yield jumped to 1.40%, the highest since June 2009.

To continue reading: Bond “Carnage” hits Mortgage Rates, Aims at Housing Bubble 2

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