You’re Not Gonna Like What Happens to Mortgage Rates · On The Market · Radar

Why Bond Yields Are Rising3:08 – 15:01

3:08

So first up, let's just talk about what actually happened.

3:11

The big picture headline is that the 10-year treasury yield, which again, this is the thing that is most closely correlated to mortgage rates.

3:20

When the treasury yield goes up on the 10-year, mortgage rates go up.

3:24

When it goes down, mortgage rates go down.

3:26

That's not always true throughout history, but over the last several decades, they have really worked in lockstep.

3:32

And the 10-year treasury has gone up a lot.

3:34

It's now nearing 5%, where it has not been for quite a while.

3:40

About a year ago, it was at about 4.3%.

3:43

And so it's not like some crazy thing, but the fact that it is moving up and moving up so quickly is what's concerning me.

3:51

And I think what's concerning investors, not just real estate investors, Stock investors, gold investors.

3:56

This is something that impacts everyone.

3:59

I've made this joke a lot on this show, but it is true.

4:01

I think bonds rule the world.

4:03

Like what happens with the bond market cascades through every other type of investment.

4:08

I'm not going to spend a lot of time on that today, but just think of it this way.

4:11

Bonds are what are known as quote unquote risk-free assets.

4:15

They're not risk-free.

4:16

That is not true.

4:17

But investors see it that way.

4:19

They are the lowest risk investment out there.

4:23

other than putting your money in a savings account, right? That's FDIC insured.

4:27

But because they are the lowest risk out there, when bond yields go up and you get a better rate, you get a better interest rate, a better return on bonds, then all of a sudden riskier assets look less attractive.

4:41

If you can earn 5% lending the U.S. government money for 10 years, maybe you don't invest in gold or maybe you don't invest in the stock market because you can get a decent return on low risk.

4:54

And so the fact that yields are climbing is going to ripple throughout the entire economy, real estate included.

5:02

Now, I want to mention that this is not just happening with 10 years.

Why Bond Yields Are Rising3:08 – 15:01

3:08

So first up, let's just talk about what actually happened.

3:11

The big picture headline is that the 10-year treasury yield, which again, this is the thing that is most closely correlated to mortgage rates.

3:20

When the treasury yield goes up on the 10-year, mortgage rates go up.

3:24

When it goes down, mortgage rates go down.

3:26

That's not always true throughout history, but over the last several decades, they have really worked in lockstep.

3:32

And the 10-year treasury has gone up a lot.

3:34

It's now nearing 5%, where it has not been for quite a while.

3:40

About a year ago, it was at about 4.3%.

3:43

And so it's not like some crazy thing, but the fact that it is moving up and moving up so quickly is what's concerning me.

3:51

And I think what's concerning investors, not just real estate investors, Stock investors, gold investors.

3:56

This is something that impacts everyone.

3:59

I've made this joke a lot on this show, but it is true.

4:01

I think bonds rule the world.

4:03

Like what happens with the bond market cascades through every other type of investment.

4:08

I'm not going to spend a lot of time on that today, but just think of it this way.

4:11

Bonds are what are known as quote unquote risk-free assets.

4:15

They're not risk-free.

4:16

That is not true.

4:17

But investors see it that way.

4:19

They are the lowest risk investment out there.

4:23

other than putting your money in a savings account, right? That's FDIC insured.

4:27

But because they are the lowest risk out there, when bond yields go up and you get a better rate, you get a better interest rate, a better return on bonds, then all of a sudden riskier assets look less attractive.

4:41

If you can earn 5% lending the U.S. government money for 10 years, maybe you don't invest in gold or maybe you don't invest in the stock market because you can get a decent return on low risk.

4:54

And so the fact that yields are climbing is going to ripple throughout the entire economy, real estate included.

5:02

Now, I want to mention that this is not just happening with 10 years.