Mortgage REITs borrow short-term or adjustable-rate money (the federal funds rate has plunged from 6.5% in January to 3.5% today) and use it to buy longer-term mortgages or mortgage-backed securities, playing the spread between the two sets of interest rates.
FORBES: House of Cards
2.
First, the rates on loans paid by many consumers (adjustable-rate mortgages, for example) and companies are set with reference to the money markets.
ECONOMIST: When banks find it hard to borrow, so do the rest of us