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Mortgage Borrowers Swoon As 10-Year Treasury Yield Climbs

This article was originally published on ETFTrends.com.

The 10-Year Treasury yield is up over 6% Friday, rapidly approaching a 2% yield, and bond investors and home buyers are now concerned. The 10-Year, which is tied closely to lending rates for home buyers, is now 20 basis points higher than it was on Monday and 36 basis points higher than its last low on Sept. 4, according to Mortgage News Daily.

Unfortunately, that is the bad news for borrowers, who have been elated by the historically low rates, scrambling to buy up any available properties. The positive news however, is that rates are still incredibly low historically, and in the weeks prior to this bounce, rates had fallen to the lowest level in three years.

“These sorts of bad performances are most often seen in the wake of stellar performances,” said Matthew Graham, chief operating officer of Mortgage News Daily. “August was the best month for mortgage rates, and 2019 has been the best year since 2011. And that’s precisely why this terrible week is possible: It’s largely a technical correction to the feverish strength in August.”

Still, analysts now are contemplating whether this is an interim correction from those recent lows or a new shift toward steadily rising rates.

“The big risk here is that the overall rate rally — the one that began in November 2018 — has run its course,” said Graham.

If the market “can match 2011′s performance, there’s a chance rates will move to new all-time lows by the end of the year,” he added. But that would require “some legitimate deterioration in the global growth outlook.”

Other experts tend to agree that there is a possibility that rates keep climbing.

"I think if you're a bond investor here and you're not dumping your treasuries, I think it's crazy, because to me, I think we don't see below 150 for a very long time, unless trade talks break down completely, and it total reverses itself, and we have massive tariffs with China. I think the rally in interest rates is on here and it's gonna be here to stay," said "Futures Now" Brian Stutland, Equity Armor Investments on CNBC.

For investors looking at a new bond trend, the  ProShares Short 20+ Year Treasury (TBF) or the  ProShares Short 7-10 Year Treasury (TBX) focus on inverse bond plays.

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