What’s going on with bond yields lately? Where is all the bond-buying passion coming from and doesn’t everyone know that the stock markets are hitting record highs? The Dow sees 17,000 just down the road and the S&P 500 climbed to and closed at 1,911.91 today. So if equities seem to be moving alongtreasuries and mortgage rates hit lows quite nicely, why the continued interest in Treasuries or mortgage-backed securities? It really should be that yields should rise, given the attitude on Wall Street, right?

You recall back in November of 2008, the Fed began a furious round of bond buying in both Treasuries and mortgage bonds to the tune of $100 billion per month.  Later, the QE program eventually morphed into an $85 billion per month bond binge. These aggressive purchases of both Treasuries and mortgage bonds drove up the prices of the securities helping to keep rates artificially low. So far the claim is that it is working.

Now take a quick trip back almost one year from today. Then Chair Bernanke mused about the eventual end of the QE program and interest rates didn’t take the news very well. Just in the mortgage realm, the 30 year fixed conforming rate jumped more than a full percentage point from May to June of 2013. That's the fastest month to month clip in 26 years. That wasn’t just a reaction but a major case of rate panic. Just the mention of an end to tapering caused stocks to fall and rates to rise. Yet the Fed ultimately announced a timeline when the QE program would end and began reducing the monthly purchases by $10B after each FOMC meeting. The monthly buy is now $45B. But where’s the panic? Not only that, if the reason rates were kept so low for so long was due primarily to the QE program, why have rates fallen to seven month lows at the same time QE slowly fades away?

The answer might be that there really is nowhere else investors can go, at least in the conventional fashion. Worldwide, Central Banks are cutting rates once again and yields are hitting lows not seen for more than a year. Some are suggesting there simply are few places to invest in today’s market given current economic and geopolitical times.

Real estate investors are one class that benefits from lower rates. Lower rates mean acquiring properties is less costly and more buyers can qualify for financing. And for those who can’t qualify for financing, they must rent. And the more renters, the higher rents will be. The next event will be the May unemployment report to be released June 7. If the jobs numbers do come in stronger than expected, the QE tapering effect may very well portend higher rates. And once investors smell lower prices, don’t be surprised at a bit of panic Treasury selling.