Long Treasury and mortgage rates rising

The price of Treasury bonds appears to be a falling knife, as shown by the important 10-year Treasury. Since bond yields move opposite to bond prices, the charts show the yields rising. Long-term Treasury yields are moving faster than short-term. Owners of $trillions of existing Treasury debt are seeing red in their portfolios.

The 30 year Treasury hit 5% today. Since bond prices change more with longer durations, the holders of existing 30 year Treasuries will be severely impacted. This can be seen in the drop of TLT, an ETF holding longer-term Treasuries. The dividend yield of TLT is only 3.5% because it’s loaded up with older low-interest Treasuries.


Bond Selloff Threatens Hopes for Economy’s Soft Landing

Growth prospects and concern over government debt are driving long-term interest rates higher

By Nick Timiraos, The New York Times, Updated Oct. 4, 2023

A sudden surge in long-term interest rates to 16-year highs is threatening hopes for an economic soft landing, all the more because the exact triggers for the move are unclear…

If the recent climb in borrowing costs — along with the accompanying slump in stock prices and the stronger dollar — is sustained, that could meaningfully slow the U.S. and global economies over the next year. The swiftness of the recent rise also increases the risk of financial-market breakdowns.

The likeliest causes appear to be a combination of expectations of better U.S. growth and concern that huge federal deficits are pressuring investors’ capacity to absorb so much debt…[end quote]

Higher bond yields will put pressure on the government since its increasing deficits will need to be financed at a higher price. Companies with maturing low-yield debt will need to refinance with higher-yield debt, which may cause some to default. Tech companies and zombies will be especially pressured.

The 30-Year Fixed Rate Mortgage Average is already over 7.3% and climbing fast.

Why 8% Mortgage Rates Aren’t Crazy

With fewer buyers for mortgage bonds, the rates on home loans can go unusually high

By Telis Demos, The Wall Street Journal, Oct. 4, 2023

Treasury yields are jumping higher, but even that doesn’t explain how high mortgage rates are getting. Home buyers might wonder whether typical mortgage rates could soon hit 8%. …

One big reason is a change in who is buying the government-backed bonds that pool many home loans into investments, which in turn drives the market price of a standard mortgage. For years the Federal Reserve or big banks, and often both, were significant and somewhat indiscriminate buyers. Now that isn’t the case. The Fed is trying to shrink its balance sheet, and banks are working to overcome the effects of rising interest rates. In the first half of 2023, banks and the Fed collectively reduced their portfolios of so-called agency mortgage-backed securities by about $207 billion, according to figures compiled by strategists at Bank of America…

Typical 30-year fixed rates on new conforming mortgages, at more than 7.4% at the end of September, have jumped far ahead of 10-year Treasury yields, then at just under 4.6%, according to Intercontinental Exchange rate data.

This nearly three percentage-point gap is big. The prepandemic average from 2017 to 2019 was under two points, according to ICE data…[end quote]

Secondary-market mortgage bonds are available on Fidelity. Almost all of them are callable, unlike Treasuries.

Rising mortgage rates put pressure on home buyers but the price of homes is still rising.



Hi Wendy,

Based on all that is going on ( there is a huge short play on the TLT and other long term bonds etc)…what would be the best way to invest in fixed income:

A) Do nothing and just hold all current cash in Money market funds with close to 4.9% but can easily go down if rates are cut ( but does give the option for opportune buy when there is a panic washout)

B) Buy treasury bills and bonds - if so which one ? 3 mth, 6 mth, 1 year, 2 year , 5 year or dare I say 10 year

c) Bond funds - There has been a total massacre on the bond funds, with many close to their all time lows! TLT, BND, choose your pick!

D) The mysterious bonds - Every time I see CNBC, there is always someone or the other saying how easy it is to get 7-11% yields on bonds- I see nothing like that anywhere. Could you tell me if this is even real??? But it is not just one or 2 nut case, I see many folks say this and so I am missing something, not them


Greatly appreciate your thoughts on this. Thanks so much!


fwiw, when I bought my condo in 96, I had an 8.25% mortgage. I could have gotten a slightly lower rate by paying points, but, as I knew that “30 year” mortgage was going to be paid off really quick, I took the higher rate and no points.

The mortgage was gone in three years.



Many bonds offer more than 11% YTW. Here’s the top 5 non-callable issues.

This is not a recommendation.


Federal Debt as Percent of GDP has been declining since the 2020 peak. Long term interest rates have been increasing since May 2023.

Federal Debt: Total Public Debt as Percent of Gross Domestic Product

Hi, @Inspired2learn. Compliments to you for a good post outlining the possibilities in the fixed income space.

Here are my comments on your suggestions.

“A) Do nothing and just hold all current cash in Money market funds with close to 4.9% but can easily go down if rates are cut ( but does give the option for opportune buy when there is a panic washout).” This is a good choice. Yield 5%, maximum liquidity and flexibility. Currently, millions of investors agree. Trillions in MMFs. As you wrote, the potential downside is rapid yield cuts – which has happened several times before.

“B) Buy treasury bills and bonds - if so which one ? 3 mth, 6 mth, 1 year, 2 year , 5 year or dare I say 10 year.” Not one – build a ladder of bills and bonds. My bond ladder has dozens of bonds going out to 10 years. Build a Bond Ladder to Boost Returns

“c) Bond funds - There has been a total massacre on the bond funds, with many close to their all time lows! TLT, BND, choose your pick!” I dislike bond funds since they do not have a specific maturity date when you get your par value back regardless of prevailing interest rates. The advantage of a bond fund is liquidity – you can redeem a few shares whenever you need the money. As opposed to selling a single bond which may be more than you need. A long bond fund like TLT will have big swings when interest rates change. Only good if you are absolutely, positively sure that yields have hit their peak. Pretty dangerous because the markets have underestimated yields consistently in this latest Fed cycle.

"D) The mysterious bonds - Every time I see CNBC, there is always someone or the other saying how easy it is to get 7-11% yields on bonds- I see nothing like that anywhere. Could you tell me if this is even real??? " Yes, it’s real. But there’s no free lunch. You have to look carefully at the bond ratings. Those high-yielding bonds are issued by low-rated companies (or even zombies) which could potentially go bankrupt and default. Any bond that yields higher than a Treasury has either (1) higher risk and/or (2) it’s callable – which means that the issuer can simply cancel the bond if yields go down, pulling the rug out from under you. I hate callable bonds. I avoid junk bonds (lower than BBB) like the plague. Even with investment grade I prefer to buy A rated or above.

But even A rated bonds sometimes default, as Lehman Brothers did in 2008. Bank CDs that are FDIC insured are AAA, equivalent to Treasuries. And even AAA rated bonds, such as Treasuries, lose value if prevailing interest rates rise. That’s how Silicon Valley bank went bust. They owned a bunch of long-dated Treasuries that had no default risk but huge vulnerability to losing value when interest rates went up.



E) TIPS. I bought some Jan '28 TIPS today. The yield was well above 2.5% (+CPI) and is attractive for that duration. It is the far end of my fixed income ladder (which is used to provide cash for my expenses over the next 5 years).

My fixed income ladder is similar to Wendy’s but shorter than 10 years (for expenses 10 years out, I will rely on stock dividends/gains, not fixed income). I have lots and lots of different T-bills and CDs of varying duration, and each week I refill the ladder is as necessary. Because short duration bills have been yielding so much, I stay almost entirely short term right now. Pretty much the furthest out I go, aside from TIPS, is 52 weeks. Once in a while I’ll snag a good CD (non-callable), but they disappear from the broker lists almost immediately. Last week or the week before I snagged a 5.55% CD from some never-heard-of-before bank, but it rapidly disappeared from inventory (before I could post about it or email Wendy about it). I did my standard CD search, saw it, clicked “buy”, executed the order, then came back to the search and it already wasn’t there anymore!


Hi Mark,

Where do you search for these?


Thanks a lot Wendy!

I might just stick with the T Bills and may be go up to 2 year Treasury notes for now.

Looks like bonds can be challenging, if one doesn’t know what they are doing…but will keep searching for the higher rated bonds to see if there is any good ones there.



On brokers websites. Fidelity’s website is the most conducive for these kind of searches, but all large brokers have them.


@Inspired2learn , I want to thank @MarkR for addressing the TIPS question. Like Mark, I am actively buying TIPS. But TIPS have their own quirks so it’s important to study them carefully before buying.

Staying short-term is safer but the opportunity to buy high-interest fixed income may fade quickly (within a year or two) as has happened before.



It’ll probably fade even quicker than that. History has shown that in the face of a recession, the fed “panics” and drops rates rapidly. They may not (almost definitely won’t) drop to zero this time around, but they will drop them quickly. This is especially true if the recession begins in an election year (and that’s looking more and more likely as the weeks pass).

My big questions are:

  1. What exactly is “high interest”? To me, having gone through the 70s and early 80s, 4.75% is not high interest. Especially as I believe that they won’t get inflation down to 2%, it’ll be closer to 3% for a while. Hence 5-year and 10-year TIPS at CPI+2.5% is a pretty good (better) alternative.
  2. For various reasons*, I am not sure if long-term rates will come down anytime soon. I should post a separate post about that.
  3. When rates come down rapidly, I will want to invest in equities rather than in fixed income. In general, I prefer long-term money to be invested in equities, as they have a better real return than fixed income in almost all cases. Obviously if we see 10+% 30-year treasuries (a la early 80s) I might opt for those, but that isn’t very likely (though it is possible).

* Primary reason is that govt is issuing new debt very rapidly, and there’s a very low probability of this stopping anytime soon. And demand for so much supply may not be there at rates lower than 5%.


Sadly, my best performing assets since December 2021 are cash equivalents(fdic insured savings, short term cds and mmfs). I am not yet confident that my stocks have bottomed out or even close to bottoming.

I saw this on Merill edge:

For example, on the citibank bond

Lets take a hypothetical 10k

So, for this bond, I actually would pay them 10,540 dollars and in 2028, they pay me 10k

But what does the coupon rate and Yield to worst inidicate.

Am I right to think that I will getting a return of 5.2% based on coupon ?
AND ALSO an additional return of 5.67% as the yields?
So, a total of 10.87% return in 5 years?

Or am I totally wrong with the way I am calculating this.

Sorry, this is totally new to me and I would rather learn it properly than do the same mistake I did with stocks.

Thank you,

If you buy 10 bonds, you will pay 10 * 10.00 * 100.538 = $10,053.80. You will also pay the previous owner interest from the previous interest payment date. Then, every jan 15th and july 15th (usually) they will pay you interest of $290. And on 9/29/28, they will pay you $10,000 plus the remainder of interest from the previous date.

The cash flows are as follows:
10/6/23 -$10,053 bonds current value
10/6/23 -$133.72 interest from 7/15/23 until 10/6/23 (you get this all back in the 1/15/24 interest payment)
1/15/24 +$290.00
7/15/24 +$290.00
1/15/28 +$290.00
7/15/28 +$290.00
9/29/28 +$10,000.00
9/29/28 +$122.44 interest from 7/15/28 through 9/29/28

If you put all that into a spreadsheet and calculate internal rate of return, you will see that this bond had a total return of about 5.75%.

(These numbers aren’t exact, you would have to check the prospectus to see the real numbers and the real dates and how exactly they calculate interest - 360 days, 365 days, etc)

If the bond is callable sometime before 2028 then you won’t get the 5.8% for the whole period and the overall yield will be lower (“yield to worst”).


That’s an excellent article on the dangers of fixed income investing.

Stocks for the long run – and “minimize the skim” of fees, commissions, trading costs and taxes.


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Thanks so much Mark! Much appreciated!