Tags: mortgage | borrowers | rates | bond

Mortgage Borrowers Share the Pain Amid Global Bond Selloff

Tuesday, 09 Jun 2015 07:51 AM

Amid the pain caused by a global downturn in bonds, U.S. homebuyers are getting their share and then some.

The average 30-year fixed mortgage rate jumped to 4.08 percent, the highest level in almost six months, according to Bankrate.com. The rate has advanced from a record low of 3.36 percent set in December 2012.

Bonds around the world are tumbling this quarter, sending borrowing costs higher for governments, companies and individuals. The rout started as investors balked at record-low yields in Germany, and prices extended declines this month as stronger-than-expected U.S. wage and employment growth added to speculation the Federal Reserve will raise interest rates.

“Inflation pressures will send Treasury yields higher,” said Hiroki Shimazu, senior market economist at SMBC Nikko Securities Inc. in Tokyo. “That means the mortgage rate will be higher.”

The U.S. 10-year yield was little changed at 2.38 percent as of 10:05 a.m. in Tokyo, according to Bloomberg Bond Trader data. The price of the 2.125 percent note due May 2025 was 97 3/4. The yield climbed to 2.43 percent last week, the highest level since October.

Treasurys have declined 2.3 percent this quarter, and global developed sovereign bonds dropped 2.6 percent, based on Bloomberg World Bond Indexes.

Benchmark 10-year Treasury yields will climb to 3 percent by year-end as rising wages help drive the inflation rate higher, Shimazu said.

U.S. average hourly earnings rose 2.3 percent in May from a year earlier, the fastest growth since August 2013, government data showed on June 5.

The difference between yields on 10-year notes and similar- maturity Treasury Inflation Protected Securities has increased to 1.88 percentage points from this year’s low of 1.49 percent set in January. The gauge, which measures expectations for consumer prices, is still below the average of 2.15 for the past decade.


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Amid the pain caused by a global downturn in bonds, U.S. homebuyers are getting their share and then some.The average 30-year fixed mortgage rate jumped to 4.08 percent, the highest level in almost six months, according to Bankrate.com. The rate has advanced from a record...
mortgage, borrowers, rates, bond
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2015-51-09
Tuesday, 09 Jun 2015 07:51 AM
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