Why Mortgage Rates Follow the 10-Year Treasury Bond
A quick explainer on a key financial relationship
When mortgage rates move, most people assume the Federal Reserve must be behind it. But the real driver behind long-term mortgage rates—especially the popular 30-year fixed loan—is often the 10-year U.S. Treasury bond.
Here’s a simple breakdown of how it works, and why it matters if you’re buying a home or considering a refinance.
Mortgage Rates Mirror the 10-Year Treasury
There’s a strong historical connection between the 30-year fixed mortgage rate and the 10-year Treasury yield. Why? Because most homeowners don’t actually keep their mortgage for 30 years—they sell, refinance, or pay it off much earlier. On average, mortgages last about 10 years, which is why lenders and investors use the 10-year bond as a benchmark.
When the yield on the 10-year Treasury goes up, mortgage rates tend to rise with it. When it drops, mortgage rates usually follow. It’s not a perfect lockstep, but the correlation is strong.
So What Role Does the Fed Play?
Here’s where it gets a bit confusing. The Federal Reserve controls the federal funds rate, which affects short-term lending between banks—not directly your mortgage.
However, when the Fed raises or lowers rates, it sends a signal to the broader financial markets about inflation and economic growth. That, in turn, influences bond yields. For example:
If the Fed raises rates to fight inflation, investors might feel confident that inflation will cool off in the long term.
That confidence can lead to a drop in 10-year bond yields, which may actually push mortgage rates lower—despite the Fed hiking short-term rates.
It sounds backward, but markets care more about expectations than headlines.
A Look at the Data
As you can see above, the spread between mortgage rates and the 10-year yield typically hovers around 1.5 to 2.5 percentage points, depending on market conditions.
Bottom Line
If you’re trying to make sense of where mortgage rates are headed, keep your eye on the 10-year Treasury bond. While the Fed moves the short-term levers, it’s the bond market that often sets the pace for mortgages.
A sharp dip in the 10-year yield could be your cue to lock in a lower rate—whether you’re buying your first home or refinancing an existing loan.