Treasury Yields Higher on Greece Debt Deal

U.S. Treasury yields are higher again today as Greece and its creditors reached a debt deal. 10 year yields are up another 5 basis points this morning to 2.45 percent. 10 year yields increased 0.25 percent since last Wednesday and probably will continue to move higher this week. We might see 10 year yields hit 2.50 percent before the week has ended.

Higher bond yields have a direct effect on mortgage rates. As a result of higher yields, mortgage rates will move higher in the coming days. Deposit rates are not directly affected by bond yields but will move higher once the FOMC increases the fed funds rate.

Since the Greece debt crisis has been resolved, the FOMC might be more inclined to increase the fed funds rate during their September meeting. Whether or not that happens will depend on economic data released over the next two months.

Stronger than expected job numbers and inflation numbers will force the FOMC to increase the rate in September. Weaker than expected numbers will force the FOMC to wait until their October or December meeting to increase the rate.

Banks and credit unions have already started increasing CD rates, savings rates, and money market rates. The increases have been small but are still welcome after almost a decade of financial institutions lowering rates. Over the past 6 months, the best 1 year CD rates have increased from 1.05 percent to 1.25 percent.

We have also seen banks raise 1 year rates as high as 1.50 percent but those increases have been temporary. Hopefully by the end of 2015, we will see the highest 1 year CD rates above 1.50 percent and as high as 2.00 percent. Of course 1 year rates moving that high will depend on the FOMC increasing the fed funds rate.