Econ 101: Bond Yield & Mortgage Rate# Stock
j*7
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Yields on 10-year and 30-year Treasury securities are typically used to set
long-term mortgage rates. Loans with short initial terms (1-, 3-, and 5-
year ARMs, e.g.) are pegged to shorter-term securities. So when bond yields
drop, typically, conventional mortgage rates fall as well (see historical
graph below). Conversely, when yields rise, so do mortgage rates. Why? If a
lender chooses to sell your mortgage loan to an investor, the lender will
likely use Treasury yields as a benchmark for value
long-term mortgage rates. Loans with short initial terms (1-, 3-, and 5-
year ARMs, e.g.) are pegged to shorter-term securities. So when bond yields
drop, typically, conventional mortgage rates fall as well (see historical
graph below). Conversely, when yields rise, so do mortgage rates. Why? If a
lender chooses to sell your mortgage loan to an investor, the lender will
likely use Treasury yields as a benchmark for value