10-year Treasury Note Yield is one of the most closely watched securities across the globe. It is considered a key benchmark for interest rates and is closely observed by traders, investors, and the Federal Reserve due to its impact on financial markets and the economy.
Higher yields often signal optimism about the economy. If the financial markets sense economic growth will pick up, they may expect the Federal Reserve to hike interest rates to battle inflation, which can lead to higher bond yields. Additionally, investors and traders move into riskier assets like stocks and commodities and therefore demand a higher return to hold safer U.S. government debt.
Back in mid-January, the 10-year yield hit nearly 5% and has since fallen to 4.40%. Does the market feel that the economy is slowing and therefore the yield has declined? And what does that mean for the mortgage market?
In the past 2-3 weeks, those filing for first-time jobless claims have increased while those who continue to collect benefits have risen. A report from the Bureau of Labor Statistics could show that for revisions in 2024, the average monthly job growth may have fallen from 182,000 to an estimated 148,000 after the revisions.
If a growing economy raises yields, a slowing economy will do the opposite. If the U.S. economy slows, it could usher in lower yields, which in turn would see a decline in home borrowing costs. In 2023, Gross Domestic Product averaged 2.9%, 2.8% in 2024, and the Congressional Budget Office is forecasting 1.9% and 1.8% in 2026-clearly a slowing economy.
The housing and mortgage markets are hoping to see mortgage rates decline ahead of the all-important spring buying season, which typically begins in late March to early April and lasts through May or early June. In mid-January, the 30-year fixed-rate mortgage was 7.04% and has recently declined to 6.89%-not a big move lower but going in the right direction.
The housing market is still constrained by low inventories of existing homes on the market for sale. As of early 2025, the U.S. housing market continues to be plagued by a notable housing shortage, with estimates ranging from 3.7 million to 5.5 million units due in part to underbuilding, restrictive zoning laws, and increased demand.
Bottom line: With borrowing costs inching lower and new listings of homes for sale on the market, the spring buying season could turn out to be a winner.
Source: Mortgage Market Guide
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