Loans Fly High
Following the news of hotter-than-expected labor data, the biggest piece of Tuesday’s financial news came from debt markets. With expectations of higher American rates for longer climbing across the world, investors translated these presumptions to the bond market, sending the yields on the 10-year and 30-year US Treasury bond to their highest levels since 2007. Throughout the day, the yield on the 10-year Treasury reached 4.758% and the 30-year Treasury yield reached 4.874%. The 10-year Treasury yield is often tracked by marketgoers to measure investor confidence, and the consensus for another rate hike remains relatively high. CME Group’s FedWatch Tool has gathered probabilities to calculate a roughly 25% chance of a rate hike in November and a 45% chance in December.
With the 10-year Treasury yield widely also as a gauge for mortgage rates, loans for houses also reached historical levels not seen in decades. The average rate on the 30-year fixed mortgage rose to 7.72%, the highest recording since late 2000. This comes after the 30-year fixed rate mortgage fell to around 6% at the beginning of 2023, but now the chances of it rising to 8% are not out of the question. Since the start of the pandemic in March 2020, the 30-year fixed rate has climbed over 4 percentage points, replacing over a decade of rates comfortably under 5% for homebuyers. With rates far higher, both new and existing-home sales markets will suffer as homebuyers prolong their purchase and home sellers find a lack of demand to reach.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.