Ready for Higher Mortgage Rates? Bond Yields Surge On Economic Data

Investors poured into 10-year treasury notes on Thursday, sending the yield on the 10-year government bond to 1.539%, considerably higher than Wednesday’s level of 1.501%.

News of lower-than-expected jobless claims in the latest week, combined with stronger-than-expected durable goods orders, is causing investors to sell bonds as they increasingly bet on a stronger U.S. economy as well as inflation.

The effect causes the yields on treasuries to rise.

10-Year Treasury an Important Metric For Debt Markets

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The 10-year note is an important instrument to watch because much of the lending environment. Everything from mortgage loans to corporate lending is based off the rate on the 10-year Treasury.

In just the last several weeks, it has jumped significantly higher. It previously had traded at a level of just roughly 1% and thus the spike has a ripple effect among other debt instruments.

The rise comes despite comments from Federal Reserve chief Jerome Powell who has said he does not anticipate inflation being an issue. Speaking before Congress this week, Powell ¬†insisted the economy still had a “way to go” and that the Fed intended to keep in place its current policies until “substantial progress had been made.”

Nonetheless, the markets could effectively force the issue of higher rates leaving the Fed with little ammunition to fight what it believes to be a still-challenged economy.

 

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