Volatility in Interest Rates

Posted by Jonathan Kostyra on Tuesday, April 24th, 2018 at 12:41pm.

Greenville Mortgage Rates Spike Higher


This week has seen a sharp spike of the 10 Year Treasury Note beyond the perceived technical ceiling or resistance of 3.0%. This is the first time since Jan 2014 that the 10 yr treasury eclipsed the big 3.0% mark. For those who don't know, 10 Year Treasury Notes are the basis in part for mortgage rates.  Was the move a total surprise?  Maybe not, Analysts at Citibank predicted this move back in Feb 2018. Perhaps the move was a matter of when and not if. 

Regarding the 10 Year Treasury Note, analysts at Citi predict the the number to be concerned with is 3.05%. A break above this, on a monthly basis,  could be very significant.  The next technical resistance levels would be around 3.14 or 3.15, levels that we haven't seen since 2010 or 2011. If rates break the 3.14/3.15 technical resistance, the next levels are 3.20 and 3.25. Some fixed income analysts weren't predicting these numbers until towards the end of year. As of writing this, rates are holding above 3.0% so these higher numbers could be in play. Time will tell. 

For those Anderson, Greenville, and Spartanburg SC home and property buyers on the fence about purchasing using leverage, you could get priced out quickly if the upward trend in Treasuries continues.  However, nothing is certain in today's volatility. Maybe rates will plunge just as fast. 

Why do you think rates are suddenly rising? Is the Fed engaging in QT (quantitive tightening)? Or are foreign buyers and other investors backing off Treasury purchases? 

On May 8th, 2018 an article was published on Marketwatch that has the CEO of JP Morgain hinting at rates on the 10 year Treasury reaching as high as 4.0 if the economy continues to accelerate and inflation rises. Jamie was quoted assaying, "“That could force the 10-year up, not down as in the in the past. You can easily deal with 4% bonds, and I think people should be prepared for that.” 

Will the Fed Invert the Yield Curve?

An inversion of the yield curve occurs when short term treasury yields rise or spike above long term yields, particularly the 10 year treasury yield. Here in the US, historically speaking,  inversions of the yield curve have on several occasions been a prelude to recessions.  The Yield Curve Inversion is yet another indicator to watch. 


+Jonathan Kostyra is an Associate Broker at Carolina Realty Associates Located at 607 Pendleton Street Suite 222 Greenville SC 29601 Jonathan can be reached at: 864-335-8936

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