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The Fed's absence hasn't affected mortgage rates

The Fed stopped buying mortgage-backed securities over a week ago, but the impact so far on the housing market has been negligible, as seen in this chart. Yes, yields on Treasury bonds have ticked up, but as of today the 10-yr Treasury yield is only 4 bps higher than it was at the end of March, which marked the end of the MBS purchase program. It's still possible that mortgage rates will edge higher, but at least now we know that this event was not a ticking time bomb for the housing market.

I and others had estimated that the end of the MBS purchase program might result in a 30-50 bps rise in mortgage rates relative to Treasury yields, but so far there is no sign of this occurring. The preliminary conclusion is that markets are and were operating in an efficient and rational manner. The end of the program was foreseen, and the market built that into prices, effectively discounting the event well in advance. In fact, 30-yr fixed rate jumbo mortgage rates today are only 4 bps higher than their all-time low (5.51%), which occurred in early 2004.

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