MORE, REALTORS is a leading St Louis REALTOR and not a financial services firm so why would we care about the 30-year treasury interest rate? The reason is that what happens on the 30-year treasury rate has an effect on 30-year mortgage rates as well. So, if the 30-year treasury rate goes down, it's reasonable to expect the 3-year mortgage rates will follow. The reverse is true as well. If the 30-year treasury rate increases, the 30-year mortgage rate likely will as well.
Why does the 30-year treasury rate affect the 30-year fixed-rate mortgage rate? Because they are competing, so to speak, for the same investors. Investors invest in the 30-year treasury due to the fact that it is a safe investment backed by the U.S. government. However, due to the safety of the investment, the 30-year treasury rate is lower than many other investment opportunities investors have. One of those alternatives, which is very similar in length of the term, is 30-year fixed-rate mortgages backed by real estate. However, while 30-year mortgages are a fairly safe investment, they have more risk than a treasury, so there needs to be more return to an investor to get them to buy them. Therefore, 30-year mortgages need to produce more yield to the investor than a 30-year treasury, hence the connection between the two.