Fannie Mae-No Politics (FNMA)

[Robert from yahoo bd]

"In addition, other factors, such as reduced demand for financial instruments backed by mortgages, have also increased the spread between mortgage rates and Treasury bonds and are likely to remain high."

"But, since early 2022, mortgage rates have risen by a surprisingly large amount relative to the 10-year Treasury rates, putting more restraint on borrowing conditions and the housing market."

"Recently, the difference between 30-year fixed mortgage rates and 10-year Treasury rates has widened to an unusual degree. Since October 2022, the spread has hovered near the levels last seen during the housing crisis."

"This factor, referred to as the option-adjusted spread (OAS; “other” in figure 3) is likely elevated due to reduced demand in the MBS market. In recent years, the Fed has reduced its holdings of MBS. In addition, private investors in MBS have readjusted portfolios in response to an increase in interest rates. This was particularly true when long-term Treasury rates jumped in the fourth quarter of 2022; demand for MBS has remained cool since then. In addition, holders of MBS may be more pessimistic about prepayment risk than empirical models reflect, which could be the case if investors think that future mortgage rates are more likely to be lower relative to current rates rather than higher."

"stronger demand for MBS could also lower rates"

https://www.brookings.edu/articles/high-mortgage-rates-are-probably-here-for-a-while/#:~:text=indicate%20recession%20periods.-,The%20spread%20between%2030%2Dyear%20fixed%20mortgage%20rates%20and%2010,2023%2C%20and%20has%20remained%20high.