Treasury yield will be the key topic in the coming days. The Treasury yield curve has literally never been as steep as it is today (275 bps between the 2- and 10-year notes).
Some have suggested that the magnitude of movement is due to convexity selling in the mortgage market. Even if this explains the recent declines, it does not detract from the fact that - absent the Federal Reserve stepping up its purchases of Treasuries or another panic - the Treasury will be issuing record amounts of debt and investors are likely to be increasingly concerned about the nation's deficit and the potential for inflation.
The sharp increase in 10 year note has a dramatic impact on the mortgage rate as I mentioned in weekend review. I would believe we have a long way to go in the house market recovering…
With the 7-year note issuing tomorrow, i guess we would see more pop up in the notes yield.
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