Days after Covid-19 was declared a pandemic, the Federal Reserve took the drastic move of cutting its benchmark interest rate to near zero. Mortgage rates fell in response — but not as much as expected.

While the 10-year Treasury yield has dropped by 1.2 percentage points since the start of the year, the 30-year fixed-rate mortgage average has fallen by just half that amount. The gap of about 2.5 points between the two figures is the largest it has been since late 2008 when the financial world was in chaos.

That has central bankers worried. They wanted the falling Treasury yield to pull mortgage rates down further.

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