Why is US mortgage rate rising?

June 5th, 2007

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We saw this article in the mainstream media: Mortgage rate rise pressures housing recovery:

Mortgage rates went up again this past week, putting more pressure on a weak housing market and further dimming prospects for a quick recovery… Mortgage rates are based on the yields of 10-year Treasury notes, which have also risen substantially this month, as strong global stock market returns have lured investors away from bonds, lowering their prices… And if rates do go as high as 7 percent, that could have a substantial impact on buying patterns, according to Keith Gumbinger of financial publisher HSH Associates, which tracks the mortgage industry.

According to the logic in this article from CNN, it claimed that booming foreign stock markets lured money away from bonds, resulting in lower bond prices (i.e. higher interest rates), which in turn resulted in higher mortgage rate.

This is another example of nonsense from the mainstream media. What a leap in logic!

Our theory is that this may have something to do with China. See our previous article, China unwilling to hoard US dollars?what?s the implication?.