Announcer:
4 Your Money is brought to you by Nelson Corp Wealth Management.
Brandy Auterson-Hurst:
It’s now time for 4 Your Money. We’re joined by James Nelson, financial planner at NelsonCorp Wealth Management. Welcome back, James.
James Nelson:
Thanks, Brandy.
Brandy Auterson-Hurst:
Mortgage rates are creeping back up again, even though the Federal Reserve hasn’t changed rates recently. What’s going on here?
James Nelson:
Yeah, it’s a good question. And I think the answer has more to do with the bond market than it does the Federal Reserve. A lot of people assume that the Fed controls mortgage rates. They really don’t. The only thing that they control is the short end of the curve, that’s short-term interest rates and not borrowing costs, especially on the longer term. We’ve got a chart here that kind of illustrates this. The standard benchmark for long-term rates is the 10-year treasury. That’s the blue line on top. You can see how it kind of sets the tone for where 30-year mortgage rates go. That’s the red line below. Investors really have been moving in here recently. They’ve been selling bonds and pushing treasury yields higher because they expect inflation and interest rates to be higher for longer. So while the Fed certainly influences interest rates, the bond market really drives the mortgage rates, especially on the long term.
Brandy Auterson-Hurst:
Okay. What should people take away from this?
James Nelson:
I think the biggest takeaway is the bond market has a lot more to do with things than people kind of assume. They focus on the stock market, but the bond market’s very important, not just for mortgage rates, but also it sends signals to us every day when it comes to inflation, market conditions, and interest rates. The bond market’s a lot more important than I think people give it credit for.
Brandy Auterson-Hurst:
All right, James. Thanks for taking the time to talk to us today.
James Nelson:
Thank you, Brandy.
Brandy Auterson-Hurst:
If you missed any of our discussion, we’ll make it available for you on ourquadcities.com.
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