When the money hits the bond or treasuries market, you should then pay attention to the 10-year Treasury yield.

Again, this is another media-friendly market indicator. If enough investment dollars flow into this segment, then the yield moves down, which, in turn, benefits home loan rates.

Conversely, when money flows back out of the bond or treasuries market, the yield moves up and, therefore, normally so do home loan rates.

A third instrument to watch is the price of what’s called a Fannie Mae fixed rate mortgage-backed security.

These are bonds secured by home and other real estate loans that are pooled together. When the price of this security goes up, generally home loan rates go down and vice versa. You can add this to your phone to track, it’s the Fannie Mae 30-year, 2.5% mortgage bond, which is currently being highly used in today’s environment.

Collectively, the above are all connected, and most of the time you can follow the flow of the money between them.

However, during times of uncertainty and fear, this is much harder to do. As a result, you will see extreme volatility within all three of these areas.

For example, your mortgage lender is probably dealing with loans that are getting paid off early, rate renegotiations, margin calls and servicing writedowns that contribute to wild price swings in the mortgage-backed securities market.



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