Financial markets are surprisingly stable, especially credit markets. Following the Fed's September QE3 announcement of open-ended intent to buy mortgage-backed securities, the 10-year Treasury note was left to the mercy of markets. Since then, 10-year Treasurys have not traded above 1.75 percent or below 1.5 percent. Meanwhile, 30-fixed mortgages have broken as low as 3.25 percent. In "normal" times, mortgage rates track the ups and downs in 10-year Treasury yields fairly well. There's a "spread" between 10-year Treasurys and mortgage-backed securities -- bond-like investments that fund most mortgage loans -- that relects, in part, investor perceptions that Treasurys are safer investments than MBS. The "spreads" we're seeing now between yields on 10-year Treasury notes and MBS are lower and tighter at any time since "normality" went out the window in 2007. I had thought that 3 percent was probably the lowest mortgage rates could go, bu...
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