Last Wednesday’s 10 year Treasury Note Auction did not go well (not enough demand) which caused the stock market to drop nearly 3%. Treasury auction watchers were hopeful beforehand that the higher yields from the previous week would create stronger demand for new debt issues from the Treasury. But, that didn’t happen. Then, the very next day the 30 year Treasury bond auction went incredibly well with strong demand. What the heck?

 

One day investors don’t want to buy 10 year Notes because the yield isn’t high enough and they think yields will go even higher. The very next day they instead buy 30 year Bonds. This makes no sense.

 

Still, if the 10 year Treasury yield closes above 3.25% rates could easily and quickly rise to at least 3.63% where there is a “soft” ceiling of resistance; but most likely the 10 year Note yield could hit 3.75% where there is a “harder” ceiling of resistance. Thus, we could see mortgage rates hit 5.75% in the near future.

 

Finally, if you look at short-term rates like the Fed Funds Rate, one of my favorite economists, Brian Wesbury of First Trust, believes the Fed Funds Rate should be at 4%, not the current 2.25%.