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Contrary to popular belief, mortgage rates are not based on the 10-year Treasury note. They're based on the bond market, mortgage bonds or mortgage-backed securities

1. Bond Market:The bond market (also debt market or credit market) is a financial market where participants can issue new debt, known as the primary market, or buy and sell debt securities, known as the secondary market. This is usually in the form of bonds, but it may include notes, bills, and so on.

2. Mortgage Bonds:A mortgage bond is a bond backed by real estate holdings or real property. In the event of a default situation, mortgage bondholders could sell off the underlying property backing a bond to compensate for the default.
3. Mortgage-Backed Securities:A mortgage-backed security (MBS) is an investment similar to a bond that is made up of a bundle of home loans bought from the banks that issued them. Investors in MBS receive periodic payments similar to bond coupon payments. The MBS is a type of asset-backed security.