Mortgage rates have stabilized below 6.5 percent for the low-fee deals, but the underlying Treasury-bond market continued to deteriorate.

Yields on U.S. Treasurys drive all interest rates everywhere, except in moments when the proud owners of $5 trillion worth of mortgages try to protect themselves by short-sale hedging in the smaller, $3.5-trillion Treasury market. The last two months have been one of those moments; 10-year T-notes reached 4.84 percent at mid-week, and haven't done better than 4.77 percent since. A full percent rise in 60 days...  more...