by Bill McBride on 12/09/2009 03:02:00 PM
Wednesday, December 09, 2009
With the Ten Year Treasury yield at 3.42%, I was wondering what that would mean for mortgage rates.
Click on graph for larger image.
This graph is from Political Calculations: Predicting Mortgage Rates and Treasury Yields (based on one of my posts).
Using their calculator and a Ten Year Yield of 3.42%, we would expect the 30 year Freddie Mac fixed mortgage rate to be around 5.38%. Of course it is lower than expected - as it has been from most of the year - and some of the difference from the expected rate is probably due to the Fed's MBS purchases (also prepayment speed is a factor - and also just randomness).
The following table shows the difference between the expected and actual rate for the last 6 months. This suggests that mortgage rates will rise about 30 to 50 bps relative to the Ten Year Treasury yield when the Fed stops buying MBS.
|Ten Year Treasury Yield||Expected Mortgage Rate||Freddie Mac Mortgage Rate||Spread|