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Treasury Rates: March 24th, 2022. The Battle of the Bulge Begins

For the 7 day period ending 3.24.22, 10 Year Treasury rates increased 14bp. In the prior week, it was up 22bp This past week, mortgage rates increased 26bp. This caused the net spread between the two to increase 12bp to 60bp ABOVE normal spread of 168bp. Bond investors are trying to get ahead of the Fed’s future moves. Rates ROCKET up and feather down.

Daily changes in the US 10 Year Treasury rates are the blue bars while the red line is the cumulative change in rates since 3/4/22. Cumulative changes over the past 14 trading periods resulted in a 60bp increase.

For the blue bars, it is unusual to have changes of greater than 0.10 in a single day and 0.20 is VERY unusual.

The historical average spread between the 30-year mortgage rates and 10 year US Treasuries is 168bp. There is NOT a direct cause & effect linkage but rather a correlation. Right now mortgage rates are rising faster than the 10 Year in anticipation of future rate increases by the Fed.

The green line is the 168bp historical spread while the pink is the current spread. Note how the red line is well above the 168 historical by 60 +168 = 228. While this is higher, there have been many times where the spread has been even larger (usually in periods of rapidly declining 10 year Treasury rates.

Yield Curve: since the beginning of the year, longer-term rates have been rising faster than very short-term rates in antioption that the Fed was going to increase rates.

5-Year Treasury rates are now actually 3bp HIGHER than 10-year. To correct for this very slight inversion, 10-year rates will need to rise FASTER than 5-year rates.


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