For more proof that the Fed does not control mortgage rates, consider this:
In the immediate aftermath of the Fed's decision to lower the Fed Funds Rate by 0.50%, mortgage rates improved by about 0.25% on average.
But, in the two days since, mortgage rates have not only given back those gains, but have climbed to their highest levels of the month.
This is because post-rate cut, the U.S. dollar is trading at all-time lows against the Euro and other currencies. Therefore, buyers of dollar-denominated securities such as mortgage bonds are getting less return for their investment.
When an investment loses its return, buyers tend to become sellers and that pushes the supply-and-demand balance to the supply side.
Additional supply of mortgage bonds drives down prices and increase mortgage rates.
It can be a complicated web, of course, but consider it to be additional evidence that the Fed Funds Rate and mortgage rates are unrelated.
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