As we discuss over and over again, mortgage interest rates are determined by the price of mortgage bonds.  Nothing else, and nothing more.  The challenge in that truth is that mortgage bond pricing is not very accessible to the general public. 

This includes the press.

As a result, the media tends to use a government bond called the “10-Year Treasury Note” as a mortgage rate indicator because it tends to move in the same direction as mortgage bonds. 

Not knowing any better and making matters worse, a lot of loan officers also use the 10-Year Treasury Note as a benchmark.  This is dangerous to their clients.

Look at the data from yesterday (as of 11:20 A.M. ET):

  • 10-Year Treasury Note: + 53 basis points
  • 30-Year 6.000% Mortgage-Backed Bond: – 19 basis points

If you were watching the 10-Year Treasury Note today, you’d think that mortgage rates would be decreasing over the course of the day instead of increasing

This same divergence has occurred several times in August and — for people watching the wrong indicator — may have led to costly rate lock errors.

The only security to watch with respect to mortgage rates each day is the price of mortgage-backed securities.


2 thoughts on “Is Your Loan Officer Incorrectly Reading In Which Direction Mortgage Bonds Are Moving?

  1. I agree, many mortgage brokers and loan officers defer to the 10 year treasury, assuming that bond prices will be completely in line with any interest rate changes.

    Unfortunately there are a number of other factors, and the 10 year is only a guide over time, not day-to-day.

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