US treasury yields jump: What does it mean for mortgage rates?

US treasury 2-year note yield, which typically moves in step with Fed interest rate expectations, was last up 18.7 basis points at 4.73 per cent, the highest since October 28. It is on track for its biggest one-day jump since the April 2025 "tariff tantrum", when US President Donald Trump announced trade levies on imports from around the world. The yield on benchmark US 10-year notes rose 12.6 basis points to 4.99 per cent, the highest since October 29. It is headed for its largest daily increase since September 23.

Pressure from the bond market undercut stocks following the discouraging report on inflation. People had to pay prices for groceries, electricity and other costs of living that were higher last month than economists expected. That could push the Federal Reserve to hike its main interest rate at its next meeting in December and beyond.

Higher interest rates can help rein in inflation, but they do so by making it more expensive for everyone to borrow money and by slowing the overall economy. Higher rates also make investors less willing to pay high prices for stocks and other investments.


Jumps in Treasury yields push downward on prices for all kinds of stocks, and they can particularly hurt companies in the real-estate business. Higher mortgage rates can keep potential customers away from homebuilders, for example, and Lennar fell 5.4 per cent for one of the sharper losses in the S&P 500.

Rival homebuilders also fell, including drops of 3.8 per cent for D.R. Horton and 3.9 per cent for PulteGroup. Builders FirstSource, which sells crown mouldings, cabinets and other products to homebuilders, sank 4.6 per cent.

Consumer Price Index rose 0.4 per cent last month after advancing 0.6 per cent in September, while core prices, which exclude the volatile food and energy components, increased 0.3 per cent last month, matching September's gain.

Fed funds futures traders are expecting a rate increase at the Fed’s December 8-9 meeting, with some betting the central bank will make a larger-than-usual 50 basis point increase. The Fed typically hikes or cuts rates in 25 basis point increments.

The Treasury sold $42 billion in 10-year notes on Tuesday, the second sale of $125 billion in coupon-bearing debt this week. The auction yielded a high rate of 5.02 per cent, awarding 95.17 per cent of bids at that rate, according to Treasury data. There was mixed demand for a $58 billion sale of 3-year notes on Monday and the US government will auction $25 billion in 30-year bonds on Thursday.

The US bond market will be closed on Wednesday for the Veterans Day holiday.