Treasury's 10-year note yield tops 5%

NEW YORK -- Investors' expectations of an interest rate cut -- and home buyers' hopes for cheaper mortgages -- seem to be disappearing.

The yield on the Treasury's 10-year note passed 5 percent yesterday, rising as high as 5.10 percent in early afternoon trading in New York, its highest point since mid-July. Some market watchers say the yield is likely to climb higher as bond prices weaken, making it even harder for consumers to finance home purchases and for companies to borrow money.

If the yield reaches 5.25 percent, a five-year high, it would match the Federal Reserve's current benchmark interest rate -- signaling that the market is, in a sense, beating the central bank to the punch in hiking rates to curb inflation.

The Fed has kept rates on hold since last summer, after two years of gradual increases.

Average consumers may be asking themselves why rates are rising now, but some market watchers are asking themselves why they went down in the first place and are bracing for the rise to continue.

Mortgage rates are rising because they're tied to the 10-year yield. Although fixed mortgage rates remain below their levels from a year ago, they have been advancing recently along with Treasury yields, adding to worries about sluggish home sales and faltering home prices.

The average US 30-year fixed mortgage rate was at 6.12 percent yesterday, up from 5.98 percent a week ago, according to Bankrate.com. The average 15-year fixed mortgage was at 5.82 percent, up from 5.69 percent last week.