Investors pushing for fatter yields on mortgage-backed securities may undercut easing mortgage rates

By ALEX VEIGA
AP Business Writer

LOS ANGELES (AP) — Mortgage rates are expected to come down later this year, but any benefit to homebuyers could be muted by developments in the market for financial instruments tied to mortgages. Over the last couple of years, uncertainty about inflation and the trajectory of mortgage rates led investors to demand a fatter yield for owning mortgage-backed securities relative to what they would get buying 10-year Treasury bonds. That difference in yields is visible as the spread between mortgage rates and bond yields. After surging to a multi-decade high, that spread has come down this year. But it remains higher than it has been historically, and that creates upward pressure on mortgage rates.