[myridium]

Whatever benefit you perceive in gaming the current inflation rate is most likely cancelled by the massively inflated house prices from everyone else having the same idea. Market is efficient, remember?

So you sold the bank a bond with an inflated par value, figuring interest rates will rise soon (lowering the bond value) and snatched a good deal. Except the banks are almost certainly better at predicting the future interest rates, and they demand a coupon rate significantly higher than the risk-free rate to compensate.

The short of it is that the banks aren't stupid; the potential for a future interest rate hike is priced in.

The exception is if the banks are selling on their mortgage bonds to someone else-- then they don't care if they're paying too much for them, and they'd be happy with the additional demand.

Isn't that how the 2008 Global Financial Crisis happened...?

[SilasX]

Banks don’t plan to hold that mortgage very long and so aren’t concerned about interest rate risk. They quickly flip it to the secondary market, which is backstopped by Fannie Mae, who can afford to overpay.

https://www.investopedia.com/articles/pf/07/secondary_mortga...

[driverdan]

I'm aware of those concerns. Of course there are more reasons why I decided to buy than what I said and there are risks in doing so. Inflation and low interest rates were important in my decision though.