RELATIONSHIP BETWEEN U.S. TREASURY YIELDS AND COMMERCIAL MORTGAGE RATES
The treasury yield refers to the interest rate that the U.S. government pays for borrowing funds to cover the debt of notes, bonds, and bills.
The mortgage rate is the interest rate that must be paid for taking out a mortgage.
Commercial mortgage rates are influenced by the U.S. Treasury yields, where lower treasury yields lead to lower mortgage rates. This results in larger homes at a more affordable price and ultimately, in economic growth. However, a rise in the U.S. Treasury yields means the mortgage rates will also increase in order to compensate for the high risk.
Although there is a clear relationship between the U.S. Treasury yields and mortgage rates, only those mortgages with a fixed rate are influenced by the treasury yields.