If there was one thing that market analysts thought they could agree upon at the start of the year, it was that interest rates were set to rise. The economy was improving. The Federal Reserve was pulling away from its program of pumping money into bond markets. The era of cheap money seemed to be coming to an end after all these years.  Longer-term interest rates have been falling this year, including hitting a new six-month low on Wednesday. Ten-year U.S. Treasury bonds yielded 3.03 percent at the end of 2013 — and 2.54 percent on Wednesday. They continued to decline on Thursday morning. Lower borrowing costs filter through to homebuyers, as well; the average rate on a 30-year fixed-rate mortgage was 4.17 percent on Wednesday, according to Bankrate.com, down from 4.54 percent at the end of last year.  What’s going on? Part of it is that, while the economy has held up fine so far this year, it has showed few signs of the kind of sharp acceleration that might prompt an end to easy money policies out of the Fed. The 3 percent 10-year rates of late last year may have been premised on sharper improvement than has materialized.  Borrowing costs for the U.S. government, and American home buyers, have fallen by about half a percentage point since the start of 2014.  And in her congressional testimony last week, the Fed chairwoman, Janet Yellen, showed concern about a possible faltering in the housing market, which was interpreted as meaning the Fed will keep rates lower for longer should the weakness continue.  But Americans looking to refinance their mortgages may have unlikely help coming from Vladimir Putin. The Russian leader’s aggressive stance toward Ukraine seems may be making some global investors increase their appetite for safe-haven assets, particularly U.S. Treasury bonds. Lower rates on Treasuries tend to also translate into lower rates on mortgages and other forms of consumer and business borrowing.  “Although equity markets are mostly ignoring the events in Ukraine, risk aversion is helping to drive assets into Treasuries,” writes Russ Koesterich, BlackRock’s chief investment strategist, in his weekly market commentary. “By our analysis, geopolitical risk is shaving approximately 0.25% off of yields.”  In other words, half of the decline in longer-term rates since the start of the year can be attributed to global political risk, in the view of one of the world’s biggest asset managers.  These lower rates are hardly a return to the ultra-low longer-term interest rates that prevailed in the spring of 2013, before the Fed signaled it would slow its purchases of bonds. But it should provide a bit of welcome relief in a housing market that could use some support.
Risk aversion prompted by instability in Ukraine, among other things, has encouraged investors to seek safe havens like U.S. Treasury bonds.