For years, people unfamiliar with the mortgage industry have said that the government's 10-year treasury note is a reasonable proxy for mortgage rates.

This is flat out wrong.  The only security that matters to mortgage rates is the price of a mortgage-backed bond.

The chart at right supports this idea.  It's shows the interest rate "spread" between the 10-year treasury note and the 10-year Fannie Mae note.

Notice how the spread is widening.

On a technical basis for Wall Street, the widening spread means that debt issued by the conforming mortgage securitizer is considered more risky of an investment.

On a personal basis for Main Street, though, the widening spread reflects the modern problems of Fannie Mae which will likely lead to both higher mortgage rates and larger loan fees for Americans.

Watching the 10-year treasury is not an effective way to track mortgage rates.  And if it was an effective way in the past, the chart shows us that it's certaintly not any longer.

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Dan Green is an active loan officer. Email or call 513-443-2020. Dan is on Twitter at @mortgagereports.