Treasury Rates: May 5th, 2022
MORTGAGE RATES ARE NOW 5.50% For the 7-day period ending 5.5.22, 10-Year Treasury rates increased 20bp while mortgage rates were also up 20bp. This caused the net spread to remain at 77bp ABOVE the normal spread of 168bp.
Daily changes in the US 10 Year Treasury rates are the blue bars while the red line is the 14-day cumulative change in rates: 15bp 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 Yield Curve rose particularly for longer-term rates this past week (the red line is current and the green is last week).
The Yield Curve remains virtually flat for 5+ years and the inversion is BACK.
In response to the job loss crises that occurred starting in Marcy 2020, the Fed reacted quickly to decrease interest rates AND by purchasing financial assets, thereby lowering long-term rates. By doing this, it stabilized the economy, and job losses slowed but the Fed’s balance sheet increased.
Now that the crises have abated and the job market is robust, the Fed is letting its portfolio of agency paper mature. This will increase longer-term interest rates, slow the economy, and slow inflation.