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10-year Treasuries: mortgage rates' imperfect barometerBy Greg McBride Mortgage watchers, such as yours truly, keep a close eye on the 10-year Treasury yield because when it moves, mortgage rates will follow. credit Debt consolidation loan. But lately, the 10-year Treasury yield has been an imperfect barometer, and that's made the art of predicting mortgage rates dicier. Unlike rates on credit cards, auto loans and other consumer loans, fixed mortgage rates are disconnected from the Federal Reserve Board's interest rate moves. They rise and fall as yields on 10-year Treasury notes move. credit Debt consolidation. Why? Mortgages are often sold to investors, packaged together into bonds and issued in financial markets as mortgage-backed securities. The yields and ultimately the prices for mortgage-backed securities and other debt instruments are priced at some interval to risk-free government debt. The 10-year Treasury is the relevant benchmark for mortgage-backed securities because the vast majority of 30-year mortgages get paid off in a time span of 10 years or less, as people move, refinance or prepay mortgages. credit U.s.-bankruptcy-code. Mortgage rates have shot up the past two weeks. After the 30-year fixed mortgage bottomed at 6. 02 percent two weeks ago, rates have rebounded sharply to 6. 40 percent, the highest since July 31. But the behavior of the 10-year Treasury notes has been different. Their yields have been particularly volatile in recent weeks, and although mortgage rates have jumped as well, the pathways aren't congruent. Yields on 10-year Treasury notes, which hit a 40-year low of 3. 61 percent at market close on Oct. 9, have since rocketed to 4. 24 percent as of Wednesday's close. Despite this jump of 63 basis points, mortgage rates have increased by a slimmer margin of 38 basis points, from 6. 02 percent on Oct. 9 to 6. 40 percent on Oct. 23. A basis point is one one- hundredth of one percentage point. Continued belowA similar phenomenon was seen whenrates were declining so dramatically between July and October. Again, mortgage rates did not keep up with the pace of changing Treasury yields, only in this instance it occurred as rates dropped. Between July 30 and Oct.
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