It comes as no surprise that mortgage rates, being the interest rates charged on long-term loans collateralized by residential real estate, broadly follow market interest rates largely benchmarked by longer-term Treasury yields.
I can't paste the FRED chart here, but what I think is more interesting is the dramatic increase in the spread between the 30-year Treasury bond yield and the 30-year average mortgage rate. 18 months ago mortgages were 0.5 points above comparable Treasury yields and today they are 3 full points higher.
There are so many "interesting" dynamics at play with regards to Treasury yields, mortgage rates, and inflation that it is a constant challenge to stay on top of even a few of them!
Long term, the spread of which you speak could very easily have significant consequences--I'm working on an article examining yield spreads and what they might portend regarding the overall economy, so I will beg your pardon for not diving too far into this particular topic just yet!
What I will say is that the divergence seems to be a trend over the past few weeks, and, should it play out over a longer time span, indicates a fairly substantial shift in the relationship between mortgage rates and Treasury yields--which are supposed to be a primary driver of mortgage rates, and so the expectation is for a positive correlation regarding rate changes, not a negative one (if yields go down mortgage rates should likewise go down, but instead they are continuing to go up).
Whether this turns out to be the case will not be known for a few weeks yet at least. However, the trends between yields and mortgage rates bears close scrutiny, because unless the trends resolve themselves and return to the expected positive correlation, the question of "what has changed?" takes on considerable significance.
Think of this as the canary in the coal mine--a sign of potential trouble up ahead.
(Incidentally, if you click on the "share links" button below any of the FRED graphs, you can generate a short URL that preserves all the settings on a FRED graph you want to share. Posting that URL will allow anyone who clicks on it to see the exact graph to which you're referring. If you look at the underlying URLS on any of the FRED charts I include in my articles you'll find I make liberal use of that feature!)
I can't paste the FRED chart here, but what I think is more interesting is the dramatic increase in the spread between the 30-year Treasury bond yield and the 30-year average mortgage rate. 18 months ago mortgages were 0.5 points above comparable Treasury yields and today they are 3 full points higher.
There are so many "interesting" dynamics at play with regards to Treasury yields, mortgage rates, and inflation that it is a constant challenge to stay on top of even a few of them!
Long term, the spread of which you speak could very easily have significant consequences--I'm working on an article examining yield spreads and what they might portend regarding the overall economy, so I will beg your pardon for not diving too far into this particular topic just yet!
What I will say is that the divergence seems to be a trend over the past few weeks, and, should it play out over a longer time span, indicates a fairly substantial shift in the relationship between mortgage rates and Treasury yields--which are supposed to be a primary driver of mortgage rates, and so the expectation is for a positive correlation regarding rate changes, not a negative one (if yields go down mortgage rates should likewise go down, but instead they are continuing to go up).
Whether this turns out to be the case will not be known for a few weeks yet at least. However, the trends between yields and mortgage rates bears close scrutiny, because unless the trends resolve themselves and return to the expected positive correlation, the question of "what has changed?" takes on considerable significance.
Think of this as the canary in the coal mine--a sign of potential trouble up ahead.
(Incidentally, if you click on the "share links" button below any of the FRED graphs, you can generate a short URL that preserves all the settings on a FRED graph you want to share. Posting that URL will allow anyone who clicks on it to see the exact graph to which you're referring. If you look at the underlying URLS on any of the FRED charts I include in my articles you'll find I make liberal use of that feature!)