for the banking sector – headlined by the failures of Silicon Valley Bank and Signature Bank, the nation’s second and third-biggest such failures ever – causing investors to pack into safer assets such as government bonds.
Yields for 10-year U.S. Treasury notes sank 70 basis points to 3.4% in the two-week period ending last Friday, helping drive down mortgage rates, which are influenced by longer-term Treasury yields. But home buyers hoping for a similarly precipitous decline in mortgage rates may not be so lucky, considering yields on 10-year government bonds shot back up to over 3.6% Wednesday and an apparent decline in the historically strong correlation between yields and mortgage rates.
The spread between 30-year mortgage rates and 10-year Treasury yields now sits at roughly 300 basis points, far higher than the typical 180 basis-point difference, noted Mortgage Bankers Association economist Joel Kan, attributing it to increased “market volatility” surrounding mortgage-backed securities.The Federal Reserve will announce at 2 p.m. whether they will further increase the federal funds rate at 2 p.m.
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