June 10, 2009 2:48 PM
Building on a post at Calculated risk, Political Calculations created a function that shows the recent empirical relation between the rate on 10 year Treasuries and mortgage rates. Swamp Report reproduces the function here. Note, we aren’t sure, but it might be possible to use it to identify temporary arbitrage opportunities.
Here? Where?
There is indeed some interesting things going on.
the 10 year playing w/ 4% is certainly worth watching.
But Tin Foil Hats are scratching their heads. The market didn’t turn green today — Though … by golly … they did take a run at it in the final minutes. Picked 30 to 40 points in the last 20 minutes before closing
According to bloomberg — “Yields on Washington-based Fannie Mae’s current-coupon 30- year fixed-rate mortgage bonds rose 0.09 percentage point to 5.06 percent as of 3 p.m. in New York, …”
The 10 year was 3.94. Your little gadget yields 5.766 rate.
So … mortgages are under priced?