Tag Archives: Mortgage rates

That Was Fast: 30-Year Fixed Mortgage Rate Spikes to 6.18%, 10-Year Treasury Yield to 3.43%. Home Sellers Face New Reality, by Wolf Richter

Posted on June 14, 2022 | Leave a comment

The bond market is oversold and due a pretty substantial rally. Nevertheless, most of us have seen the lowest interest rates were ever going to see in our lifetimes. From Wolf Richter at wolfstreet.com:

Something has to give. And it’s going to be price.

The average 30-year fixed mortgage rate today spiked to 6.18%, from 5.85% on Friday, according to the daily index by Mortgage News Daily. Aside from the sheer magnitude of the spike, this was also the highest mortgage rate since collection of the daily data began in April 2009. This was lightning fast, with mortgage rates nearly doubling since the beginning of the year (chart via Mortgage News Daily):

Mortgage rates follow the 10-year Treasury yield, but there is a spread between them, and the spread varies. The 10-year Treasury yield spiked by 28 basis points today, to 3.43% at the close, a huge move, and the highest since April 2011:

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Holy-Moly Mortgage Rates Hit 5.64%, 10-Year Treasury Yield 3.12%, Long-Term Treasury Bond Fund Gets Massacred, by Wolf Richter

Posted on May 8, 2022 | Leave a comment

Interest rates’ spectacular ascent is due a pause, but the long term trend has shifted from the down to up. From Wolf Richter at wolfstreet.com:

So the Fed Gets Ready to Walk Away from the Bond Market, and All Kinds of Stuff Happens.

he price of the iShares 20+ Year Treasury Bond ETF [TLT], which tracks an index of Treasury securities with long maturities, dropped another 1.5% on Friday, after having dropped 2.7% on Thursday. It has plunged 21% year-to-date and 33.7% from the peak in August 2020. In return for this plunge in price, investors get a yield that has risen to 3.0%.

August 2020 marked the peak of the greatest bond-market bubble in US history. It was when the 10-year Treasury yield hit historic lows while our favorite hype mongers predicted that it would drop below zero and become negative. But this bond bubble is blowing up. And this is what the “bond massacre” looks like for investors who’d thought they’d invested in a conservative instrument, when in fact they’d bought a high-risk bet on the continuance of the bond bubble, a bet on long-term interest rates going negative. And WHOOSH went their money:

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US Housing Market to Get Uglier in Near Future, by Wolf Richter

Posted on December 28, 2018 | Leave a comment

The home sales index has been moving from the upper left on the graph to the lower right. From Wolf Richter at wolfstreet.com:

Sales decline to steepen, no respite in sight.

The reasons for the housing-market downturn are in the eye of the beholder, as we will see in a moment. But whatever the reasons for it may be, the data on the housing market is getting uglier by the month.

Pending home sales is a forward-looking measure. It counts how many contracts were signed, rather than how many sales actually closed that month. There can be a lag of about a month or two between signing the contract and closing the sale. This morning, the National Association of Realtors (NAR) released its Pending Home Sales Index for November, an indication of the direction of actual sales to be reported for December and January. This index for November fell to the lowest level since May 2014:

“There is no reason to be concerned,” the report said, reassuringly. And it predicted “solid growth potential for the long-term.”

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Mortgage Rates May Hit 6% Sooner, as Fed Sheds Mortgage-Backed Securities, But What Will that Do to Housing Bubble 2? by Wolf Richter

Posted on November 15, 2018 | Leave a comment

Rising interest  rates will have a straightforward effect on the housing market: fewer houses will be built and sold. From Wolf Richter at wolfstreet.com:

Mortgage rates are climbing faster than the 10-year Treasury yield.

The average interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) and a 20% down-payment rose to 5.17% for the latest reporting week, according to the Mortgage Bankers Association (MBA) today. This is the highest average rate since September 2009 (chart via Investing.com):

Many people with smaller down payments and/or lower credit ratings are already paying quite a bit more. Top-tier borrowers pay less.

Thus, mortgage rates have moved a little closer to the next line in the sand, 6%, which is still historically low. At that point, the interest rate would be back where it had been in December 2008, when the Fed was unleashing its program of interest rate repression even for long-dated maturities via QE that later included the purchase of mortgaged-backed securities (MBS), which helped push down mortgage rates further.

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12 Indications That The Next Major Global Economic Crisis Could Be Just Around The Corner, by Michael Snyder

Posted on May 27, 2018 | Leave a comment

You don’t have to look too hard to see some ominous portents for the global economy. From Michael Snyder at theeconomiccollapseblog.com:

There have not been so many trouble signs for the global economy in a very long time.  Analysts are sounding the alarm about junk bond defaults, the smart money is getting out of stocks at an astounding rate, mortgage rates are absolutely skyrocketing, and Europe is already facing a full blown financial meltdown.  Of course expectations that another global economic crisis will happen among the general population are probably at an all-time low right now, but the reality of the matter is that we are probably closer to a new one erupting than at any point since the last one in 2008.  Since the last financial crisis our long-term debt problems have just continued to grow, and there are many that believe that the next crisis will actually be far worse than what we experienced ten years ago.

So how bad are things at this moment?

The following are 12 indications that the next major global economic crisis could be just around the corner…

#1 The “smart money” is getting out of stocks at a rate that we haven’t seen since just before the financial crisis of 2008.

#2 Moody’s is warning that a “particularly large wave” of junk bond defaults is coming.  And as I have written about so many times before, junk bonds are often an early warning indicator for a major financial crisis.

#3 According to the FDIC, a closely watched category known as “assets of problem banks” more than tripled during the first quarter of 2018.  What that means is that some really big banks are now officially in “problem” territory.

#4 U.S. Treasury bonds are having the worst start to a year since the Great Depression.

#5 Mortgage interest rates just hit a 7 year high, and they have been rising at the fastest pace in nearly 50 years.  This is going to be absolutely crippling for the real estate and housing industries.

#6 Retail industry debt defaults have hit a record high in 2018.

To continue reading: 12 Indications That The Next Major Global Economic Crisis Could Be Just Around The Corner

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US Treasury 10-Year Yield Breaks Out, Mortgage Rates Jump to Highest in 7 Years, by Wolf Richter

Posted on May 15, 2018 | 1 comment

The yield on the 10-year treasury note has been trending irregularly upwards since July 2016. Today it set a new high for the move. From Wolf Richter at wolfstreet.com:

But no blood in the streets. Just a rate-hike cycle at work.

Today the US Treasury 10-year yield broke out of its recent range and surged 8 basis points to 3.08% at the close, the highest since July 2011. The price of a bond falls when its yield rises.

The odds have been stacked against the bond market for a while: the Fed’s rate-hike cycle, the Fed’s QE Unwind, a surge in government spending, the tax cuts, and the ensuing onslaught of debt issuance that is looking for buyers.

In addition, and with impeccable timing, the biggest US corporations with the most “cash” parked “overseas” are now “repatriating” this “cash” and are using it to buy back their own shares. What this really means for the bond market is this: This “cash” isn’t cash but is invested in securities, mostly US Treasury securities, corporate bonds, and the like. Companies are now selling those securities in order to use the proceeds to buy back their own shares at a record pace. So these huge bond buyers have turned into net sellers.

In other words, to entice enough new investors into the market, yields have to rise to make those bonds more attractive.

While short-term Treasury yields have been rising for a couple of years in a fairly consistent manner, longer-term yields are not so well-behaved and, despite the Fed’s efforts to push them up, are subject to messy market forces and speculative positions, including large short positions. And so the 10-year yield has moved in leaps followed by some backtracking until the next break-out and leap. Note that the most recent back-track only lasted a couple of months and barely shows up on this chart:

The two year yield ticked up to 2.58%, the highest since July 2008:

The difference (spread) between the two-year yield and the 10-year yield widened from 45 basis point to 50 basis points (0.5 percentage points), as the 10-year yield rose faster today (by 8 basis points) than the two-year yield (3 basis points).

To continue reading: US Treasury 10-Year Yield Breaks Out, Mortgage Rates Jump to Highest in 7 Years

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What Will Rising Mortgage Rates Do to Housing Bubble 2? by Wolf Richter

Posted on January 20, 2018 | Leave a comment

Rising interest rates will increase the cost of financing a house with a mortgage. If they go up enough, expect the housing market to falter. From Wolf Richter at wolfstreet.com:

Oops, they’re already rising.

The US government bond market has further soured this week, with Treasuries selling off across the spectrum. When bond prices fall, yields rise. For example, the two-year Treasury yield rose to 2.06% on Friday, the highest since September 2008.

In the chart, note the determined spike of 79 basis points since September 8, 2017. That was the month when the Fed announced the highly telegraphed details of its QE Unwind.

September as month of the QE-Unwind announcement keeps cropping up. All kinds of things began to happen, at first quietly, without drawing much attention. But then the trajectory just kept going.

The three-year yield, which had gone nowhere for the first eight months of 2017, rose to 2.20% on Friday, the highest since October 1, 2008. It has spiked 82 basis points since September 8:

The ten-year yield – the benchmark for financial markets that most influences US mortgage rates – jumped to 2.66% late Friday.

This is particularly interesting because the 10-year yield had declined from March 2017 into August despite the Fed’s three rate hikes last year, and rising short-term yields.

At 2.66%, the 10-year yield has reached its highest level since April 2014, when the “Taper Tantrum” was winding down. That Taper Tantrum was the bond market’s way of saying “we’re shocked and appalled,” when Chairman Bernanke dropped hints the Fed might eventually begin tapering what the market had called “QE Infinity.”

The 10-year yield has now doubled since the historic intraday low on July 7, 2016 of 1.32% (it closed that day at 1.37%, a historic closing low):

Friday capped four weeks of pain in the Treasury market. But it has not impacted yet the corporate bond market, and the spread in yields between Treasuries and corporate bonds, and particularly junk bonds, has further narrowed. And it has not yet impacted the stock market, and there has been no adjustment in the market’s risk pricing yet.

To continue reading: What Will Rising Mortgage Rates Do to Housing Bubble 2?

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What’ll Happen to Housing Bubble 2 as Mortgage Rates Jump? by Wolf Richter

Posted on November 17, 2016 | 1 comment

If mortgage rates keep rising, it is self-evident what will happen to housing bubble 2: it will pop. From Wolf Richter at wolfstreet.com:

Oops, they’re already jumping.

In the few days since the election, we got a flavor of what might happen when the bond market sees hues of inflation, expects the Fed to respond, and suddenly (after years of closing its eyes to it) dreads a tsunami of government deficit spending, on top of the flood of deficit spending already washing over the land.

The US government borrowed on average $850 billion per year over the last two fiscal years, in total $1.71 trillion. Very soon, the gross national debt will hit $20 trillion. And with a little help from the next administration’s plans, the annual new debt to be issued by the US government could balloon far beyond $1 trillion a year.

These bonds will have to be sold to someone, but the Fed is no mood of buying; instead, it has been flip-flopping about raising rates.

And the biggest foreign holders of US Treasuries are now net-sellers, according to the Treasury Department’s International Capital Data for September, released today. China dumped another $28.1 billion in Treasuries, bringing its stash down to $1.16 trillion, the lowest since September 2012. Japan, the second largest holder, shed $7.6 brillion, cutting its pile to $1.14 trillion. Saudi Arabia has been selling hand over fist for eight months in a row. Its holdings are now down to $89.4 billion. In total, foreign holders dumped $76.6 billion of Treasuries in September.

When the election moved Trump’s campaign promises of fiscal stimulus spending a step forward, with buyers scarce and sellers plentiful, Treasury prices, which had been declining since July, fell hard and yields soared. This is the “Trump spike” of the 10-year Treasury yield, including today’s much needed breather – the little hook adorning the spike (chart via StockCharts.com):

Since July, the 10-year yield went from 1.35% to 2.25%, with about half of that journey in the days since the election. And mortgage rates follow Treasury yields.

The Mortgage Bankers Association (MBA) reported today that the average 30-year fixed rate mortgage with conforming loan balances ($417,000 or less) jumped from 3.77% last week to 3.95% this week.

According to Mortgage News Daily, the average 30-year mortgage rate had hit 4.02% on Tuesday, up 0.40 percentage point in three trading days (Friday the bond market was closed). It was the biggest three-day spike in mortgage rates since the Taper Tantrum in the summer of 2013.

And this spike in rates immediately hit demand for mortgages during the week. According to the MBA, mortgage applications dropped 9.2% seasonally adjusted and 10% not seasonally adjusted from the prior week, with refinance activity dropping 11% and purchase activity dropping 6%. The report explained the phenomenon this way:

Following the election, mortgage rates saw their biggest week over week increase since the taper tantrum in June 2013, and reached their highest level since January of this year. Investor expectations of faster growth and higher inflation are driving the jump up in rates….

But it wasn’t just this week. According to the report, rates have increased in four of the past five weeks.

To continue reading: What’ll Happen to Housing Bubble 2 as Mortgage Rates Jump?

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