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It’s opposite day for mortgage rates

By Holden Lewis ·
Thursday, December 2, 2010
Posted: 10 am ET

Mortgage rates climbed to their highest level since July, according to Bankrate's weekly mortgage analysis, in which Marcie Geffner explores why rates are rising in this time of quantitative easing.

Rates are even higher today than they were yesterday morning, when Bankrate's research department was gathering the data. Our researchers caught rates on an elevator that was going up, before the elevator reached its destination.

The Federal Reserve has been buying Treasuries to depress long-term interest rates, at the same time that international investors are buying Treasuries to store money in a safe place. Presumably, those investors have been withdrawing money from European sovereign debt.

Silly me, I thought that these purchases would cause Treasury prices to rise, and for yields to fall. And I figured that mortgage rates would fall, too -- maybe not as much, but downward nevertheless. I was wrong. The 10-year Treasury yield has risen 38 basis points in one month and the 30-year, fixed-rate mortgage has risen 29 basis points in the same time.

This reminds me of the spring, when the Federal Reserve's first round of quantitative easing was about to end. I (and everyone else I read) thought that mortgage rates and Treasury yields would rise as soon as quantitative easing ended, and would continue to rise through year's end. Instead, the end of quantitative easing was followed by the lowest mortgage rates in more than 50 years.

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