The interest rate that drives mortgages and other loans is snapping higher

The U.S. 10-year Treasury yield looks set to spring higher, taking mortgages and consumer loan rates with it, after spending the past month in a rut.

President Donald Trump’s criticism of the Fed’s interest rate policies in an interview with CNBC was part of the catalyst, since traders said the Federal Reserve would now be sure to stay on its rate hiking path to prove its independence. That helped push up yields which move opposite bond prices.

The 10-year yield, between 2.8 and 2.9 percent for more than a month, had first jumped to life Friday after reports that the Bank of Japan was considering changing its easy money policies that have held Japanese government bond yields near zero and depressed global rates.

The 10-year yield shot to 2.965 percent Monday, rising from a low of 2.87, nearly equal to the maximum move in the last four weeks.

“The 10-year could go 3 percent on this move. There seems to be a momentum that has brought out sideline players, anxious to sell the market,” said Ian Lyngen, U.S. rate strategist at BMO. Lyngen said the lack of volatility signaled the 10-year had been coiled for a breakout, after spending 20 sessions in a 9.8 basis point range, an extremely rare event.

The report on the Bank of Japan continued to roil the markets Monday, and overnight the 10-year Japanese government bond jumped by 5 basis points, to 0.083 percent, the highest since February. The BOJ, which meets next week, announced it would buy bonds to curb the action, and the 40-year JGB also spiked, touching 0.92 percent.

Be the first to comment

Leave a Reply

Your email address will not be published.


*