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Bond Rally Could Offer Help for Buyers

Rising bond prices have pushed down treasury yields, which can ultimately drive down mortgage rates. But some investors say the relief could be short lived.

NEW YORK – Bond prices have risen in June, pushing down yields on the 10-year U.S. Treasury note by nearly a half percentage point since late May. On June 14, the yield fell to 4.212%, the largest two-week decline of 2024. The 10-year yield is influenced by investors' expectations for short-term interest rate moves by the U.S. Federal Reserve and is a benchmark for mortgage rates and other borrowing costs.

Recent economic data has suggested that inflation is declining closer to the Fed's 2% target, even as Fed officials have suggested that there will be just one interest rate cut this year, down from three cuts projected in March.

According to CME Group data, investors say there is a 70% probability that the Fed will cut rates at least twice this year, with the first cut likely in September. After mortgage rates declined along with 10-year yields at the end of last year, sales of existing homes climbed to an annual rate of 4.38 million in February, from 3.85 million in October, according to the National Association of Realtors®. When 30-year mortgage interest rates rose above 7%, sales declined again.

Even modest fluctuations in Treasury yields can have a serious impact on the housing market, and some investors have cautioned that any relief for home buyers could be short-lived.

Source: Wall Street Journal (06/17/24) Goldfarb, Sam

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