Why U.S. Mortgage Rates Move with Treasury Yields?

Why U.S. Mortgage Rates Move with Treasury Yields?

When you see headlines that 30-year mortgage rates are up or down, you’ll often also see mention of the 10‑Year U.S. Treasury Note or “Treasury yields” going in the same direction. But why exactly do mortgage rates move so closely with Treasury yields? And what does that mean for homebuyers, homeowners and the housing market?

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The basic relationship: mortgage rates follow long-term government yields

At its core, the reason mortgage rates move with Treasury yields is that both are long-term fixed-income instruments, and both are priced in the broader bond market based on investor expectations. As one summary puts it: “Fixed mortgage rates and Treasury yields generally move together.”

More specifically:

• The 30-year fixed mortgage is roughly a 30-year exposure; the 10-year Treasury Note is a long-term benchmark.
• Because both involve long maturities, changes in the rate investors demand for one spill over to the other.
• The pricing of a mortgage involves the yield of a mortgage-backed security (MBS), which itself competes with Treasuries for investor capital.

Evidence of the association in the real world

The 10-year Treasury yield and mortgage rates move closely together, according to empirical research. The Federal Reserve Bank of Richmond, for instance, observes that “mortgage interest rates typically follow the yield of the 10-year U.S. Treasury closely.” They have moved in tandem for more than 30 years.”

As stated in a recent report:

• Mortgage rates jumped above 7% after a sovereign-credit downgrade of the U.S., because yields on Treasuries spiked.
• Early in 2025, mortgage rates dropped along with the 10-year yield.

Case study: current movements and their consequences

To demonstrate how and why Treasury yields and mortgage rates moved in tandem, let’s look at recent market occurrences from 2024 to 2025.

• The 10-year Treasury yield fell from high levels in late 2024 and early 2025 as concerns about a recession increased and inflation surprises subsided. Mortgage rates declined in this setting.
• During a U.S. sovereign-credit downgrade (by Moody’s) the 10-year yield spiked, and mortgage rates jumped accordingly — above 7% in some cases.
• The housing-market commentary shows that elevated mortgage rates, driven by higher yields, are acting as a significant drag on affordability and home-sales momentum.

What to watch going forward

For borrowers, home-buyers and real-estate watchers, here are key signals to keep an eye on:

• 10-year Treasury yield trend

Since the yield on the 10-year is a benchmark, watch whether it is trending up or down. A sustained move can suggest mortgage-rate direction.

• Inflation data & expectations

Core inflation, CPI, PCE and inflation-expectation surveys will influence yield moves → mortgage-rate moves.

• Fed commentary & monetary-policy expectations

While the Fed doesn’t set mortgage rates, its tone and the expectations for future short-term rates shape the long-term yield curve, influencing mortgages indirectly.

• Mortgage spreads and MBS market health

Periods of financial stress may widen spreads between mortgages and Treasuries. So a low Treasury yield doesn’t always guarantee ultra-low mortgage rates if spreads expand.

Conclusion: Why U.S. Mortgage Rates Move with Treasury Yields?

The link between U.S. mortgage rates and Treasury yields is a foundational piece of how the housing-finance system works. Because mortgages are long-term loans and because mortgage-backed securities compete with government debt for investor dollars, when Treasury yields move, mortgage rates tend to follow.

For prospective home-buyers or homeowners considering refinancing, this means paying attention to bond markets—not just your lender or local housing conditions. 

A shift in the 10-year Treasury yield may signal a broader change in borrowing costs, which can affect affordability, monthly payments and housing-market activity.

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