Guys,

I am trying to understand the current changes in mortgage interest rate and its relation with MBS and T-Notes. I was reading different articles, what I got was:

1) Government is selling TNotes at high yield (because of high supply and less demand to attract buyers?), which is causing the banks and other companies (Fennie Mai, Fredie Mac) to raise the interest rates to pull investors to buy MBS instead of low risk tnotes? 

2) Lot of people are refinancing thier old mortgage (which they have with high interest), which is pushing the investers to buy MBS with low interest rate and sell of their high interest MBS (because of repayment risk?) which is causing the current interest rate to go high???? (I dont know about this)

On the other hand, currently the US government will not allow any other countries to increase interest rates because US needs a strong dollar to encourage the purchase of Treasuries.

The interest rate will increase no matter what, because over liquidity is waiting for us in the near future.

Gaga,

That is silly....do you think that the economies around the world would love to raise rates right now in the middle of this recession, but big bad America won't let them?

The whole world is dealing with a tough time and any increase in short term rates would do nothing to help them recover, and would probably delay said recovery. Inflation is a problem on the horizon, but without demand it will not be happening anytime real soon, regardless of the amount of liquidity in the market.