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 the government’s 10-year Treasury bonds.
Mortgage-backed securities, or MBS, are investments made up of home loans and, like bonds, pay interest to investors
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