The mortgage industry witnessed to sharp rises in bond yields yesterday, forcing mortgage lenders to alter pricing on at least two occasions mid-day. As the bonds rose, Treasury yields reached their highest point since the beginning of the year. Additionally, the 10-year Treasury yield reached its highest level since June 2009. Yesterday’s abrupt rise in bonds could affect mortgage rates for some time.
So what exactly caused the bond to rise so sharply? Surprisingly, some mortgage analysts believe there was a significant connection between the bond increase and the tension between Google and China. Once Google officially pulled out of China earlier this week, Congressional leaders applauded the company’s decision while criticizing the Chinese government for its history on human rights relating to Internet censorship.
Meanwhile, China appears poised to increase its control in a dispute with the United States over its command of Western business. Last year, China surpassed the United States in renewable energy investments. Still, what does that have to do with mortgage rates? Well, since China has nearly doubled its revenue over the United States and has become the world’s largest clean-energy product manufacturer, the market may have feared any expanded tension between the two countries could result in a restriction in U.S. investments.
After yesterday’s dreadful 5-year Treasury auction, bond prices remain up slightly today. With unemployment figures showing continued improvement this morning, there is hope the bond will once again fall back to earth. Then again, results from the 7-year Treasury auction are expected shortly.
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