Even CNBC doesn’t understand the bond market

Bond market lesson 1: when prices go up (generally considered a good thing by investors) the yield goes down.

Now read 10-year yield has its worst day in nearly 3 months.  As the writer says: “Bond prices logged their best one-day gain in about three months on Thursday.”

I am sure the headline was written by somebody other than the article’s author, but one would expect even headline writers at CNBC to understand the basics of the bond market.

So for the benefit of the CNBC headline writer, here is an alternative headline: “10-year Treasury has best day in nearly 3 months.”

The 10-year Treasury is key to mortgage rates. As I mentioned in yesterday’s Mortgage rates “will reach 4.5% by year end”: “For fixed rate mortgages (FRM) the key benchmark is the yield on the US 10 year Treasury, so the quick and easy way to keep abreast of likely mortgage trends is to follow that one yield, which is widely quoted on a daily basis. The 30yr FRM rate is a margin or spread over the yield on the 10T. While the spread varies, so far in 2015 it has averaged 1.71%, so if you add that to the 10y Treasury yield, you will have a reasonable expectation of the 30yr FRM rate”

If you – or somebody you know – are considering buying or selling a home and have questions about the market and/or current home prices, feel free to contact me on 617.834.8205 or [email protected].

Andrew Oliver is a Realtor with Harborside Sotheby’s International Realty. Each Office Is Independently Owned and Operated
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