Mortgage rates and Bond Market
US Treasury notes and mortgage backed securities are typically bought by the same investors. Mortgage back securities are what banks loan on for lending on the housing market. The banks obviously do not hold the mortgages for 30 years they open bids and sell to the secondary market. So banks keep interest rates in pretty close coorelation to the T Notes but a few points higher. Treasury notes have little or no risk, they can afford to offer lower rates. As a result, lower interest rates on T notes are in direct relation to lower rates on mortgages.
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