The 10-year Treasury yield is back above 5% and American housing is already paying for it

The 10-year Treasury yield rose about 13 basis points on Thursday to a little over 5.1%. The two-year added 15 basis points to 4.879%.

The move started with oil. Trump posted that the United States does not need a deal with Iran, because it already has Iran's money and its strait. West Texas Intermediate settled 2% higher at US$88.19 and Brent 1.9% higher at US$94.48.

Dearer crude feeds inflation, and the Federal Reserve is raising rates to fight inflation. A quarter-point rise in December was priced at 88% after Tuesday's consumer price report. Futures have it fully priced this morning.

Chart: US 10-year yield averaged 5.13% in October. The 10-year US Treasury yield, monthly average, in percent, November 2016 to October 2026. It rose again on Thursday; US home sales hit a 16-year low in October. — This story’s chart of the day.

The cost of all this turns up in housing first. American existing home sales fell 5.5% in October to an annual pace of 3.75 million, the weakest in 16 years, with 1.59 million homes sitting on the market. Weekly jobless claims rose 9,000 to 200,000.

A word of caution

Chris Rupkey of FWDBONDS reckons higher rates are now driving the housing correction deeper. Our read is that a 10-year above 5% works on American mortgages first, and October's home sales are the early evidence.

This story ran in Nvidia Without Jensen Friday 13 November’s edition, with the market snapshot, the other two stories, the numbers and the week ahead. Read the whole edition →

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