If anything could sabotage recovery prospects it would be another swoon in housing. That's why the recent rise in long-term interest rates has raised concerns among investors. Yields on 10-year Treasury securities have increased to 3.6%, from 2.6% three months ago, and the average 30-year mortgage rate is up 0.6 percentage points, to 5.4%. A new downshift in home demand would put further pressure on home prices, leading to more bank writedowns of mortgage securities and more erosion of bank capital. Clearly, that's not something the Federal Reserve would like to see.
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