Active Properties Article

So, how are mortgage rates set? What is the relation to Bonds?

Although there are a slew of different factors that affect interest rates, the movement of the 10-year Treasury bond yield is said to be the best indicator to determine whether mortgage rates will rise or fall. But why?

Bonds affect mortgage interest rates because they both compete as investments. They are attractive to investors who want a fixed and stable return in exchange for low risk.

So a good way to predict which way mortgage rates are headed is to look at the 10-year bond yield. You can find it on finance websites alongside other stock tickers, or in the newspaper. If it’s moving higher, mortgage rates probably are too. If it’s dropping, mortgage rates may be improving as well.

Investors turn to bonds as a safe investment when the economic outlook is poor. When purchases of bonds increase, the associated yield falls, and so do mortgage rates. But when the economy is expected to do well, investors jump into stocks, forcing bond prices lower and pushing the yield (and mortgage rates) higher.

For a full detailed article by:  Kimberly Amadeo
Click Here

For more Bond reading & background:

What Are Bonds, and How Do They Work?

What Types of Bonds Are There?

Cliff Daniels
Realtor
Active Properties
Boulder Colorado
720 434 1418
cliff@actprop.com