Since then four and five-year swap rates are up a net 0.10%, with longer term rates just marginally up. Nothing has happened over the last few weeks to change the message, but a couple of events that reinforce it are worth noting.
The yield on three-month US Treasury Bills, after turning negative in December for the first time since the government began selling them in 1929, picked up to 0.33% in early February but has since fallen back to 0.13%.
Bloomberg News said last week that the reason Treasury Bill rates touched 0% in December was that investors were panicking but the reason yields are now falling is that the Federal Reserve’s efforts to revive credit markets are working.
Demand for bills is rising because investors are snapping up the shortest-term US securities as the Fed buys Treasuries to drive down longer-term borrowing costs in its quantitative easing programme.
For example, China bought $5.6bn in bills and sold $964m in US notes and bonds in February, the first time since November that it purchased more bills than longer maturity debt.
This is one example of why fixed rates for longer term mortgages are unlikely to fall much from current levels and why most borrowers should be looking to fix for, say, five to 10 years, at some stage over the next few months.