Interest Rates Going Up? Supply and Demand for Mortgage Backed Securities

The Federal Reserve Bank of New York bought $2.599 billion in Treasurys on Wednesday. Dealers submitted $13.087 billion in debt maturing between 2021 and 2026 to the Fed. When the Fed last bought debt with those maturities, it purchased about $3 billion. The U.S. central bank has purchased more than $250 billion of the $300 billion in U.S. debt it promised in March to buy in an effort to keep borrowing costs, particularly for companies and homebuyers, affordable. Fed policy makers said last week they will slow down purchases to finish the buybacks in October, a month later than previously anticipated. Ten-year note yields , which move in the opposite direction of prices, remained lower on the day. The yield fell 7 basis points to 3.44%, the lowest in more than a month

WIth the Fed purchasing less and planning to finish their buybacks in October, obviously demand will diminish.  With diminished demand, The Principles of Supply & Demand tells us prices should drop.  Simple math will tell us when Bond prices drop the RATE goes Up.  How Much? Good question, but I thing it would be safe to assume we can expect at least a 1/2% or more rate increase.  If you are considering either refinancing or purchasing a home, you need to know the facts in order to make the best possible decision for you and your family.