If you ever wanted proof that mortgage rates react to global events, the past four days are it. Worldwide, investors are shunning the United States mortgage market in search of higher returns elsewhere.
The more they sell, the worse mortgage rates get.
The latest catalyst for extra supply: speculation about a Bank of Japan interest rate increase coming soon. The Japanese central bank meets Thursday and Friday and is expected to hold its overnight lending rate at 0.500% although Finance Minister Omi has hinted at future rate hikes.
Japan is a major player in the U.S.-based mortgage bond market so the thought of higher returns at home is putting mortgage bonds on the market and forcing prices down.
As always, prices down, yields up. And the carnage continues.
