The Mortgage Man

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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these toxic assets are killing banks and there is no real hope for financial recovery until Mark-To-Market is repealed or an outlet to dump these assets is created.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.

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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.

Mortgage Rate Update

Due to the outstanding rally in stocks this afternoon, bonds sold off to their worst levels of the day.  So it is in fact a good time to lock your rate if you were floating to this point.  When rates are posted tomorrow they will likely be .125% to .25% higher than quotes this morning.  For more on the latest mortgage rates or to apply online, go to www.SteveRussellOnline.com.

Thursday November 13, 2008

Mortgage Bonds move higher.

After a sharp sell off earlier this week, mortgage bonds are making a comeback today and appear to be holding steady right at the 50 day and 200 day moving averages.  This has had a positive affect on rates this morning as I am quoting 30 year fixed conventional rates below 6% for the first time in over a week.

Initial jobless claims came out significantly worse than expected at 516,000 vs. the expected 479,000.  In addition, continuing jobless claims reached a 25 year high at 3.89 million.  This bad news for the economy is generally seen as a positive for the bond market as the likelihood of inflation lessens.

At the time of this post, the stock market is up slightly.

To keep up with the latest mortgage rates, go to www.SteveRussellOnline.com, or call 888-25-STEVE (78383)

Friday October 24, 2008

Mortgage bonds move below 200 day average.

It is really amazing how much the global money markets are intertwined.  Overnight, Japan’s stock market plummeted after lower than expected earnings were reported for Samsung and Sony.  That ripple effect moved over to Britain’s markets where the economy shrank for the first time since 1992, signaling a confirmed recession.  The combination of the foreign markets having a really bad day led the Dow Futures to halt trading before the open this morning.  Halting trading on Dow Futures is extremely rare, and a sure sign of volitility.

In normal market conditions, a selloff in stocks would mean money was moving into bonds, and would typically signal a good day for mortgage rates.  Today, however, because of the continued liquidity issues with the market, the rush seems to be towards cash for safety.  Mortgage bonds moved below the 200 day moving average which is generally a sign of long term trends.  If you have an active mortgage file that has not yet been locked, it would be prudent to do so today ahead of uncertain volitility and worsening rates.

Some good news came out today.  Existing homes sales soared to a 13 month high signaling a boost in the real estate market.  And, Oil was trading as low at $64 per barrel.  This is due in large part to the strenghening dollar as compared to other global currencies.  But, when you are at the pump getting gas for $1 less than 3 months ago, few people care why, they are just glad to see it.

Tuesday October 21, 2008

World’s largest bond fund increases stake in mortgage backed securities.

Mortgage bonds moved higher yesterday on the news that Pimco, the world’s largest bond fund, has increased it’s stake in mortgage backed securities to an all time high.  This led investors to believe that the risk is worth the price in mortgage bonds, and prices soared.

As a home buyer, this means that rates got a lot more aggressive yesterday, and if you are actively seeking a home, it might be a good time to lock your rate.  The drastic increase in rates last week have been almost completely erased, and on a technical level, mortgage bonds have moved back above the 25, 50, 100 and 200 day moving averages.  Pushing through those levels of resistance is a positive sign long term for mortgage rates.

For the latest rates, check www.SteveRussellOnline.com.