Long-term rate-indicative Treasury yields, which have been generally trending higher recently, broke into yet another higher range Tuesday afternoon.
The benchmark 10-year Treasury yield traditionally used in the industry approached 3.2% and somewhat shorter-term Treasury yields some considered more in lines with the average lives of today’s loans. Late Tuesday afternoon that yield was at 3.17%. More recently it has been closer to 3%. The yield last was this high in early summer.
The jump in Treasury yields Tuesday “probably caught a few hedgers by surprise,” said Les Parker, president of hedge consultancy Parker & Co., who uses the five-year Treasury yield tracked by Thomson Reuters as a mortgage benchmark.
People are starting to “seriously wonder about their application volumes,” he said, adding that the Mortgage Bankers Association application survey due to be released Wednesday morning will likely be closely watched as a result.
There has been “definitely a big move on spreads (between Treasuries and mortgages), particularly today. It’s worse in mortgages than it is in Treasuries,” Parker said.
“I do not expect that to last,” he added. “It’s purely a supply and demand issue.”
