The home-builder stocks have been one of the strongest industry groups in 2012. Today, the leading sector is starting to pullback. The small retreat in the home-builder stocks could be due to the recent surge in yields on the 10-year T-note. When yields move higher it makes mortgages more expensive. The 30 year mortgage rates have been at all time lows over the past few months. This morning, the yield on the 10 year T-Note is higher by 0.06 to 1.786 percent. Investors should know that the yields on the 10 year T-note will have the most effect on mortgage rates. Bonds can be followed or traded by using the iShares Barclays 7-10 Year Treasury Bond Fund (NYSEARCA:IEF), and the iShares Barclays 20+ Yr Treasury Bond (ETF) (NYSEARCA:TLT).
Some leading home-builder stocks that are pulling back today include KB Home (NYSE:KBH), D.R. Horton Inc (NYSE:DHI), and The Ryland Group Inc (NYSE:RYL). Traders must remember that higher yields could have a negative effect on this industry group. At this time, yields are still near the historic lows so the effects of higher yields are minimal. Please note that the recent housing boom in U.S. could get halted quickly if yields start to move up to quickly.