Rate Relationship

mortgage rates As the Fed reduces its huge balance sheet over the next several years, what will its eventual holdings consist of? Traditionally, it’s only been Treasuries. Now, holdings include $1.8 trillion in mortgage-backed securities, bought to support housing, and $2.5 trillion in Treasuries. As the Fed sells both, rates will rise, but importantly the spread between 30-year mortgages and 10-year Treasuries will widen, pushing mortgage rates up by an extra eighth-of-a-point.

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