The Mortgage Man

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Archive for new york times

Friday July 11, 2008

Volatility in stocks leads to a mild bond rally.

Bonds are flat at the time of this post, but they weren’t that way earlier.  We have been up and down and back to the middle today on a variety of financially related news.

Oil prices hit a new high this morning after an early spike of almost $5/barrel to push it over $147 for the first time.  This spike in oil caused a sell off in stocks, and a sell off in stocks went into the bond market creating a little upward movement this morning.

If you haven’t seen the news yet, Fannie Mae and Freddie Mac (the nations 2 largest secondary mortgage market guarantors, and holders of over 50% of the total $6 trillion in existing home mortgages) are hurting.  Secretary of Treasury Henry Paulson had some possitive things to say about them yesterday and how the government can help to fortify their position.  Then, the New York Times reported that the government is considering a contingency plan to take over Fannie Mae and Freddie Mac.  This, of course, is not good news for anybody, and traders were lining up to sell stock in both companies today leading to a 40% decline in value.

Now, the bond market feeds on bad news, so there was a rally based on all of the above mentioned negativity.  Then, the report about US exports came out with a lower than expected trade deficit, and much better than expected foreign consumption of US goods.  Apparently, the weak dollar makes exports to foreign countries more palatable, and our friends across the pond are buying more of our goods as a result.

All in all, I will stick with my recommendation from yesterday to lock your mortgage rate if you have a short term mortgage in processing.  We are still facing a significant upside resistance level at the 200 day moving average, and it is not likely that any gains that may be obtained would be worth sitting with baited breathe and calling your mortgage banker 4 times a day.  Go ahead and lock, then enjoy your weekend.