Yield up 12 BPS to 4.51%
By MortgageDaily.com staff
3/9/2005

The 10-year Treasury yield soared to its highest level since last summer amid worries of accelerating inflation.

The yield reached 4.51% Wednesday afternoon -- the highest level since July -- from 4.39% at Tuesday's close, according to MarketWatch. The price sank 0.97 to 95.91.

Concerns of rapid inflation generated from rising global commodity prices, led by oil. Crude-oil futures went above $55 a barrel, "a development that could stir inflation should companies have to pass along higher energy costs to consumers," the publication said. The broad measure of about 17 commodity prices reportedly stands at its highest since 1980.

Investors demand higher yields to offset the reduction inflation creates in the value of fixed interest payments collected on bond investments.

Bill Hornbarger, chief fixed-income strategist at A.G. Edwards & Co., reportedly told MarketWatch that he believes the 10-year yield could easily reach 4.6%, and after that the next key target would be 4.88%.

The last time the 10-year note yielded 4.8% was in June, according to weekly data from the Federal Reserve Board.

In its most recent mortgage finance outlook, the Mortgage Bankers Association had the 10-year Treasury yield averaging only 4.4%, 4.5%, and 4.7%, for the second, third and fourth quarter, respectively.

Long-term mortgage rates have been on upward path, with the 30-year fixed-rate mortgage climbing 10 basis points to 5.79% last week. The MBA predicted the 30-year will average 6.0% next quarter and 6.4% by the end of the year.

Article © MortgageDaily.com All Rights Reserved