Treasury And Mortgage Snapshot: 30-Year Fixed Mortgage At 14-Month High

Includes: IYF, REM, TLT
by: Doug Short

What's New: I've updated the charts below through yesterday's close (June 13). The latest Freddie Mac Weekly Primary Mortgage Market Survey, out yesterday, puts the 30-year fixed at 3.98%. That's the highest rate since early April of last year. Its all-time low was 3.31%, which dates from the third week in November of last year.

The yield on the 10-year note stands at 2.19%, down slightly from its interim closing high of 2.25% yesterday. Yesterday's close is 76 bps above its all-time closing low of 1.43% set in July 2012. But more dramatic is its rise of 53 bps since its interim low in early May. The S&P 500 is now up 14.74% for 2013 and 1.97% below the all-time closing high of May 21.

Here is a snapshot of selected yields and the 30-year fixed mortgage over the past year.

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For an eye-opening context on the 30-year fixed, here is the complete Freddie Mac survey data from the Fed's repository. Many first-wave boomers (my household included) were buying homes in the early 1980s. At its peak in October 1981, the 30-year fixed was at 18.63 percent. The long-term graph doesn't capture the recent rise in rates over the past six months.

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Even with the recent rise in mortgage rates, the 30-year fixed continues to confirm of a key aspect of the Fed's QE success, and the low yields have certainly reduced the pain of Uncle Sam's interest payments on Treasuries (although the yields are up from recent historic lows of last summer). But, as for loans to small businesses, the Fed strategy is a solution to a non-problem. Here's a snippet from the latest NFIB Small Business Economic Trends report:

Five percent of the owners reported that all their credit needs were not met, down 1 point and the lowest reading since February 2008. Twenty-eight (28) percent reported all credit needs met, and 53 percent explicitly said they did not want a loan. Only 2 percent reported that financing was their top business problem. Twenty-nine (29) percent of all owners reported borrowing on a regular basis, down 2 points.

A Perspective on Yields Since 2007

The first chart shows the daily performance of several Treasuries and the Fed Funds Rate (FFR) since 2007. The source for the yields is the Daily Treasury Yield Curve Rates from the US Department of the Treasury and the New York Fed's website for the FFR.

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Now let's see the 10-year against the S&P 500 with some notes on Federal Reserve intervention. Fed policy has been a major influence on market behavior, and the S&P 500, our market exemplar below, is, as I pointed out above, just at a new all-time high.

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For a long-term view of weekly Treasury yields, also focusing on the 10-year, see my Treasury Yields in Perspective.