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Mortgage Dynamics: Why the 10 Yr Treasury Fails as Benchmark to Track RatesThe Treasury has long been the benchmark for tracking mortgage rate movement, i.e. 30 year fixed vs. 10 year Treasury. Based on the market over the last couple of months, that has not happened. The folloing graph will give you perspective on why the models are not following the traditional pattern. 30Y CONF FIXED vs. 10Y TREASURY
Why are mortgages widening or losing value vs. other benchmarks like treasuries? 1. Lack of buyers. Dealers' balance sheets are full and market volatility.
We have more sellers than buyers. The selling bias puts pressure on mortgages, forcing mortgage prices lower and wider. The usual buyers of mortgages aren't buying or are buying other investments at cheaper prices Historical View of VolatilityCredit and liquidity concerns stemming from the sub-prime fall-out that has also flowed through to the prime-A market has caused the correlation between the 10Y Treasury and mortgage yields to break down.
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Author
Alan 'AJ' Nisen California Contra Costa Mortgage Officer A Large Bank in America Lafayette, CA Office Phone: (925) 688-3820 Cell Phone: (925) 963-5836 More information... Contact Alan 'AJ' Nisen California Contra Costa Mortgage Officer |
