Core Viewpoint - President Trump's directive to purchase mortgage bonds aims to lower mortgage rates, with a proposed plan of $200 billion to stimulate the market [2][3]. Group 1: Mortgage Bonds and Market Impact - The Federal Reserve previously bought mortgage bonds during the pandemic, which are packaged loans sold to investors with U.S. government guarantees [2][3]. - The optimism surrounding Trump's directive has contributed to a rally in mortgage bonds, resulting in the 30-year mortgage rate dropping below 6% for the first time in three years [3][4]. - Increased demand for mortgage bonds can lead to tighter spreads, which in turn can lower mortgage rates as investors accept less compensation above benchmark rates [4][6]. Group 2: Market Dynamics - The agency mortgage-backed securities market is valued at $9 trillion and serves as a foundation for most new home loans [6]. - The fixed rate for most U.S. borrowers is influenced by the current 10-year Treasury yield, which was at 4.17% recently, plus a spread that depends on investor demand [6]. - For Trump's plan to effectively lower mortgage rates, sustained buying from other investors is necessary, rather than selling into a stronger market [5].