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