SAN ANTONIO — The recent rise in the 10-year Treasury yield is not only affecting rates for borrowers, but also many investments.
“During COVID about a year ago, interest rates fell dramatically. That was really good for those of us that are borrowing. Ten-year treasury rates went down to around 0.4%. They’ve now risen around 1.5%,” said Karl Eggerss, senior advisor and partner of Covenant.
The 10-year Treasury yield is what the U.S. government has to pay to borrow money for 10 years. It’s considered a measure of investor confidence in the economy and impacts consumer loans. Eggerss explained how the rising rate affects different investments.
“As interest rates go up number one for investors, that means bond prices are going down. They move opposite. For a lot of people who have bond mutual funds, and bond exchange-traded funds, and their 401ks? They’re probably losing money as interest rates are going up,” explained Eggerss.
The higher bond yields also affect consumers who are looking to get a home or car loan.
“Borrowers are looking at interest rates for borrowing for cars, or borrowing for homes. As interest rates go up, it’s obviously costing people more money. Now, the reason why they’re going up is actually because the economy is getting better,” he explained. “It’s improved quite a bit and because of that, interest rates are starting to creep up.”
For current homeowners, Eggerss recommends to still take advantage of the historically low mortgage rates and refinance.
“If we’re thinking about where interest rates were just a few months ago, they may seem like you missed out, that interest rates have risen too much and you’ve missed out on refinancing. But that’s not the case,” said Eggerss. “If you have debt out there, check your current rate and see if there’s a better deal out there. Mortgage is number one on the list because it’s probably your biggest debt.”