10-Year US Treasury Yield Reaches 5.10% at Midday
Key Facts
The 10-year US Treasury yield reached 5.10% at midday on Thursday, November 12, according to the Associated Press, amid concerns that rising oil prices could fuel inflation. The yield was 4.98% late Tuesday, November 10, before the bond market closed on Wednesday for Veterans Day. The agency said the rise in yields reflected investors’ concern that price pressures would persist. This reading does not establish that the yield exceeded 5.10% after the 30-year bond auction. The Treasury had scheduled the auction for November 12 in its announcement of the refunding program.
Brent crude rose to $94.47 a barrel, up 1.8% on Thursday, according to data cited by the Associated Press. Prices had jumped from about $92 to more than $94 after a post by President Donald Trump, before later retreating. The agency linked higher bond yields to inflation concerns prompted by rising oil prices. Long-term bond yields affect borrowing costs, as lenders use them as a guide when pricing home loans. The Associated Press said higher inflation expectations amid rising oil prices pushed those yields higher, lifting mortgage rates.
In the housing market, existing-home sales in October fell 5.5% from September to a seasonally adjusted annual rate of 3.75 million units, according to the Associated Press. This was the slowest sales pace since August 2010. The result also came in below economists’ forecasts of 3.8 million units annually, and sales were down 8.8% from October of the previous year. The weak sales coincided with higher mortgage financing costs, which are affected by long-term bond yields. The average rate on a 30-year fixed-rate mortgage was 7.11% in the week ended November 12, compared with 7.18% the previous week.
The average benchmark 30-year mortgage rate had reached 7.4% in early October, its highest level in nearly three years, according to the Associated Press. In the bond market, the 10-year yield had mostly been trending lower since early October, after reaching its highest level since 2002. These moves put mortgage financing costs in direct connection with changes in long-term yields. The Federal Reserve left interest rates unchanged in late October after raising them in September. But persistently high inflation increased the likelihood of a rate hike at the December meeting, the agency said.
On the issuance front, the US Treasury announced on November 4 an offering of $125 billion in securities to refinance about $97 billion in bonds maturing on November 15. The department said the operation would raise about $28 billion in new cash from private investors and scheduled the 30-year bond auction for November 12. It also said it expects to maintain auction sizes for nominal notes and floating-rate notes over the coming quarters. It added that it would continue to monitor demand trends and the risks and costs of different issuance patterns. The auction result was not yet available in the information the agency cited on mid-session market moves.