"Many financial institutions borrow short-term money and then invest it in longer-term Treasurys like the 10-year bond," Sohn said of carry trading. "They're borrowing at 1 percent and getting 4 percent on the bond, for a 3 percent return."
Cautious U.S. businesses have also been borrowing less from banks. And so banks, which need to put their money somewhere, have also turned to U.S. Treasurys, creating even more demand for government bonds.
Susan Cinkala, left, and husband Dean with their children, Justin, 10, and Whitney, 7, at their Potomac home. Dean Cinkala has lost track of how many times he has refinanced in recent years. "I'm just continually trying to drop my interest rate," he said.
(Bill O'leary -- The Washington Post)
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The picture doesn't look as if it is going to change soon. Many housing economists are predicting that mortgage rates will remain low for the rest of this year, with a slight drift upward.
So homeowners continue to chase low rates. For instance, Les Smith is refinancing his home in Silver Spring to cut about $150 from his monthly mortgage payment by lowering his interest rate to 5.5 percent from 6 percent on a 20-year mortgage.
"I'm just looking to save money," Smith said.
Tim Brindle, who owns a house in Bethesda, will reduce his rate a full percentage point by refinancing, saving himself about $250 a month. "The more money for me the better," he said. "I can use that money to buy my kids gifts."
So is chasing low rates the way to go for every homeowner?
"It shouldn't be done in a panic," advised economist Duncan. "Homeowners need to do a solid bit of pencil work with the family budget, knowing something about their future plans. If you're moving in 18 months, it's unlikely refinancing will make much difference to you. But in many cases, even with a very small move down in rates, it does make economic sense."
