Brokers know that the yield on the 10-year, risk-free 10-year Treasury note backed by the U.S. Government ended the week at 2.71, having started the week at 2.37 percentand started 2022 at 1.50 percent. Brokers and borrowers are always looking at the 10-year Treasury rates because mortgage rates often closely track the 10-year Treasury note yields. It’s just another way of Orion’s brokers keeping your clients “in the know” as part of assessing the right time to take out a mortgage or refinance. But how does the 10-year note actually affect mortgage rates?

The U.S. note and bond “yield” is the amount the government pays on the securities they sell. When investors buy Treasury bonds, they’re essentially loaning the government money in exchange for receiving “interest” until the bond matures and the owneris repaid face value. Treasury notes and bonds are the “safest” security as they are secured or guaranteed for repayment by the government. Treasury securities come in different maturity rates, ranging from a few months to 30 years.

When yields are relatively low, like at present, it means demand is high and the government doesn’t have any trouble selling these bonds to investors. That is because during risky times when economies are not doing well, investors like the safety of Treasury notes and bonds. The opposite is also true. When yields are high,it means demand is low and the government is looking to entice investors with higher interest rates. This occurs when the outlook and return on other investments (e.g. stocks and mortgages) are better, usually due to a brighter economic outlook.

That is what makes the 10-year Treasury note yield rate so important for your clients: beyond the simple rate of return, it is also often used as a gauge of investor sentiment. Do investors feel confident enough to invest in the current economy? Following the COVID-19 outbreak, Treasury bonds rates sank to an all-time low thanks to high demand. Why? Many investors wanted the safety of guaranteed government bonds during a global health crisis.

It is important for your to remind your clients that the 10-year Treasury yield is not a magic crystal ball, but rather just one of many factors that can affect mortgage rates. The economic factors that influence Treasury rates are the same ones that influence mortgage rates: Unemployment, inflation, and the general housing market are just a couple of other data points used to help determine interest rates. With all the moving parts, it’s no wonder rates rise and fallon a daily, even hourly basis, and why it is important to keep in touch with your Orion AE.

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