Long-term Treasury yields blew up this week, along with mortgage rates. In two weeks, the 10-year Treasury-note has jumped from 2.25 percent to 2.85 percent, and mortgages from sub-5 percent to 5.5 percent (even that costs a 1 percent fee today), shutting down refinances altogether. Not even the all-time lows had created demand for purchase loans. There are good odds that this move is temporary; even so, why did it happen? The arithmetic alone is peculiar. The Fed began on Jan. 5 to buy mortgages at a $100-billion-per-month rate. There is not half that much demand for new purchase loans, and refis are net-neutral in system supply and demand. So, somebody is selling existing loans in greater volume than Fed purchases. China and Japan, big holders of Ginnie Mae, liquidating to raise cash for their own stimulus deals? Probably, but this week's Treasury auctions found strong foreign demand. The Grim Reaper theory: Every nation on earth is trying to sell a mass of government deb...
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