The Mortgage Man
Get more out of your mortgage experience!Archive for Mortgage Bonds
Bad Bank, Good For Economy
The Federal Deposit Insurance Corporation (FDIC) announced last night that it will create a “Bad Bank” to purchase the toxic assets on the books of the nations banking institutions. This was originally part of the TARP plan but it didn’t work out as planned.
The idea is that because of Mark-To-Market accounting, these toxic assets are killing banks and there is no real hope for financial recovery until Mark-To-Market is repealed or an outlet to dump these assets is created. Ideally, the best scenario would be both.
The stock market is reacting favorably to the news as it is a sign that the government is making strides in the right direction.
Mortgage Bonds Trading At Historic Highs
Today the jobless claims report came out for December with a total of 524,000 jobs lost. This was worse than projections of 500,000, but far better than rumors of nearly 700,000. So far this morning, bond traders are reacting to the rumor and not the projection by selling mortgage bonds.
As mortgage rates continue to be unbelieveably low, the stock market is struggling. Wal-Mart reported that due to one of the worst holiday shopping seasons on record, they will not meet expectations for the 4th quarter. This continues to fuel uncertainty in the greater economy, and economic uncertainty drives investors to sell stocks and buy bonds. Long term, this is good for mortgage rates and the real estate market.
Also, the FED announced yesterday that through the first 3 days of this week, they bought $10.2 billion in Fannie Mae, Freddie Mac and Ginne Mae mortgage backed securities, part of their overall plan to buy up over $500 billion in MBS’s between now and June.
Friday November 14, 2008
This weeks financial news wrap up.
It is interesting the times that we live in right now. The 500 point intraday swings in the stock market have become so commonplace that no one even gets excited about it anymore. Even yesterday, there was an intraday low of -331 only to rally in the afternoon to +552, a nearly 900 point intraday swing. What is even more curious is a buying rally after incredibly bad economic reports.
All of this leads to the conclusion that the markets are trading almost entirely on emotion. Fundamentals appear to have no affect, and that uncertainty bleeds over to the bond market as well.
Mortgage bonds started the week on a downward slide, then recovered Wednesday and Thursday morning with a nice rally. That rally began losing steam yesterday afternoon and continues to show weakness this morning. Daily volatility aside, mortgage rates long term are better than they have been in about a month and continue to trade in a near sideways channel.
Conventional wisdom would lead us to believe that as poor economic data comes out, investors would pull money out of stocks, invest in bonds, driving up the yield and driving down mortgage rates. But, as previously discuss, conventional wisdom does not appear to have a place in this market.
All in all, if you have a mortgage loan in process that you have not yet locked, my bias would be towards locking to protect against uncertainty.
For today’s mortgage rates, or to apply for a mortgage loan, go to SteveRussellOnline.com. Or call 888-257-8383 for a free consultation.
