The Bank of Japan has a lot of sway over the U.S. Treasury market right now — and that means it's got big influence over the home mortgage market.
The Bank of Japan's policy decision Wednesday (overnight Tuesday New York time) could be significant enough to move global interest rates.
Mortgages are loosely tied to the 10-year Treasury yield, which has been flirting with a move above 1.70 percent for a couple of weeks. During most of August, the 10-year yield stayed in a range below 1.60 percent.
Traders say the Bank of Japan's policy decision Wednesday could help snap the U.S. 10-year to a level somewhere above 1.70 percent. On a closing basis, its recent high was 1.73 percent, and on an intra-day basis it reached the psychologically important 1.75 percent. That level is seen as a near-term target, and an extended move above that could provide enough oomph to boost home mortgage rates.
The Bank of Japan could decide on a further cut to already negative rates, or it could adjust the assets that it is buying, or it may tweak its quantitative easing program and thereby affect long-term Japanese yields. If Japanese yields rise, investors and others can move into Japanese bonds, taking pressure off U.S. bond prices, which move inversely to yields.