Here’s what that means for you

Dow futures tumble 200 points on Monday as 10-year Treasury yield tops 5%

The yield on the benchmark 10-year Treasury topped 5% again Monday, a key level that could impact mortgage rates, student debt, auto loans and more.

Last week, the 10-year yield crossed the 5% threshold for the first time in 16 years after Federal Reserve Chair Jerome Powell said “inflation is still too high,” raising expectations that another rate hike may not be completely off the table this year.

“That has real impacts on the economy, ultimately affecting every individual in the U.S.,” said Mark Hamrick,’s senior economic analyst.

Stock futures fell Monday as yields rose and investors assessed the prospect of higher-for-longer interest rates from the Fed.

The yield on the 10-year note is a barometer for mortgage rates and other types of loans.

“When the 10-year yield goes up, it will have a knock-on effect for almost everything,” according to Brett House, economics professor at Columbia Business School.

Even though many of these consumer loans are fixed, anyone taking out a new loan will likely pay more in interest, he said.

Why Treasury yields have jumped

But interest rates are just part of the story.

Most of the recent jump in Treasury yields is due to a so-called term premium, said Andrew Hunter, deputy chief U.S. economist at Capital Economics.

Basically, investors are demanding a higher return to lend their money to the U.S. government — in this case, for 10 years. One reason: Investors seem skittish about rising U.S. government debt, Hunter said. Generally, investors demand a higher return if they perceive a greater risk of the government’s inability to pay back debt in the future.

The rapid rise in Treasury yields may “accelerate an already weakening economic picture that is masked by higher rates,” said Tony Dwyer, chief market strategist Canaccord Genuity Group, in a Monday note.

Mortgage rates will stay high

Most Americans’ largest liability is their home mortgage. Currently, the average 30-year fixed rate is up to 8%, according to Freddie Mac.

“For those who are planning to buy a home, this is really bad news,” said Eugenio Aleman, chief economist at Raymond James.

“Mortgage rates will probably continue to go up and that will push affordability farther away.”

Student loans could get pricier

There is also a correlation between…

Read More:
Here’s what that means for you

Leave a comment

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More

Get more stuff like this
in your inbox

Subscribe to our mailing list and get interesting stuff and updates to your email inbox.

Thank you for subscribing.

Something went wrong.