Question: When demand for the bonds rises, which translates into lower interest rates on them, banks can offer homeowners lower interest rates on their underlying mortgages.

"When demand for the bonds rises, which translates into lower interest rates on them, banks can offer homeowners lower interest rates on their underlying mortgages." Source: Nathaniel Popper, "Fed Action Spurs Broad Rally," New York Times , September 13, 2012.

Increased demand for mortgage-backed bonds should ?(increase OR decrease) the interest rates on the bonds because the increased demand will ?(lower OR raise) the price of the bonds. Since bond prices and interest rates are ?(positively inversely) related, higher bond prices would ?(raise OR reduce) the yield (interest rate) on the bonds.

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