KENNETH BARGERS | In The News

Realtor, Tennis Player, Titans & Vols Fan, Nashvillian… Live! Work! Play! in Middle Tennessee

Market Comment for Week of December 5, 2011…

with one comment

MARKET COMMENT Mortgage bond prices ended slightly higher last week, which pushed mortgage interest rates lower. Stocks were stronger as the DOW surged higher by 291 points Monday and 490 points Wednesday. The Fed stepped in to help the EU deal with their debt crisis through some liquidity moves along with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank. The moves generally helped equities across the globe. Mortgage bonds traded in a choppy but tight pattern throughout the week despite the strength in equities. MBS were buoyed by remarks from German Chancellor Merkel which indicated there is no quick fix and the solution to the Euro debt crisis will take years. Mortgage bonds ended the week better by approximately 1/8 to 1/4 of a discount point.

LOOKING AHEAD

• Factory Orders; Dec. 5; Consensus Estimate Down 0.5%; Important. A measure of manufacturing sector strength. Weakness may lead to lower rates.
• Consumer Credit; Dec. 7; Consensus Estimate $7b; Low importance. A significantly large increase may lead to lower mortgage interest rates.
• Weekly Jobless Claims; Dec. 8; Consensus Estimate 397k; Important. An indication of employment. Higher claims may result in lower rates.
• Trade Data; Dec. 9; Consensus Estimate $44.3b0 deficit; Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates.
• U of Michigan Consumer Sentiment; Dec. 9; Consensus Estimate 64; Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

DISPARITY The 10 and 30-year Treasury bond yields are often viewed as “benchmarks”, reflecting the overall state of interest rates in the US economy. Many people concerned about mortgage interest rates track these bonds as a barometer for mortgage interest rates. However, in reality the Treasury and mortgage markets trade independently.

The supply and demand characteristics of Treasury bonds and mortgage-backed securities (MBS) differ significantly. Treasury securities represent money needed to fund the operations of the US government. MBSs, on the other hand, represent borrowing by homeowners.

Information related to Treasury bonds is relatively easy to come by. Almost every major news medium reports changes. On the other hand, accurate mortgage interest rate information is difficult and costly to obtain.

In the absence of information directly related to the mortgage interest rate markets, Treasury information can be useful in that the bond market generally trends in the same direction. However, mortgage interest rates can vary significantly. In fact, many times the Treasuries will trade wildly while MBS only see minor price changes and vice versa. Thus, differences between Treasuries and MBS sometimes lead to misleading price change differentials. Last Wednesday mortgage-backed securities closed down 2/32nds on the day while the 10-year Treasury fell 25/32nds and the 30-year Treasury fell 64/32nds. This is a prime example where anyone that looked solely at Treasuries thought the mortgage market was worsening when in reality mortgage interest rates were near unchanged on the day. The data provides a valuable lesson into the differences between treasury bonds and mortgage-backed securities. This is just another example of why looking solely at treasuries can lead people to the wrong conclusions.

Keying in on the correct information can mean the difference between making and losing a tremendous amount of money when making float and lock decisions in the short term.

Source: F&M Mortgage, Todd Kabel; MMIS, Rate Link; Blog distribution provided by Kenneth Bargers and Bargers Solutions, a proud member of Pilkerton Realtors, residential real estate services located in Nashville, Tennessee

Advertisements

One Response

Subscribe to comments with RSS.

  1. […] In the absence of information directly related to the mortgage interest rate markets, Treasury information can be useful in that the bond market generally trends in the same direction. However, mortgage interest rates can vary significantly. In fact, many times the Treasuries will trade wildly while MBS only see minor price changes and vice versa. Thus, differences between Treasuries and MBS sometimes lead to misleading price change differentials. Last Wednesday mortgage-backed securities closed down 2/32nds on the day while the 10-year Treasury fell 25/32nds and the 30-year Treasury fell 64/32nds. This is a prime example where anyone that looked solely at Treasuries thought the mortgage market was worsening when in reality mortgage interest rates were near unchanged on the day. The data provides a valuable lesson into the differences between treasury bonds and mortgage-backed securities. This is just another example of why looking solely at treasuries can lead people to the wrong conclusions.Source: kennethbargers.com […]


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Hiaco

Ad, Sales & Marketing.

Rachel Being Chatty

Now featuring 15% more sarcasm.

MovieBabble

The Casual Way to Discuss Movies

The Ninth Life

It's time to be inspired, become encouraged, and get uplifted!

MovieBabble

The Casual Way to Discuss Movies

The Shameful Sheep

shit storms, shame, and stories that make you cringe

Autoindigo Blog

Fresh news about automotive world. Cars overviews written by experts, pros and cons, features, performance, safety, interior and driving.

Little Fears

Tales of whimsy, humor and courgettes

www.virtual-reality-shop.co.uk/

VR, AR, 3D and Video Glasses Reviews

Woodstock Business Welcome

Welcome Wagon Canada

Blookup Blog

Turn and print all your digital contents, blogs and social networks into amazing real paper books on blookup.com

nalinidesignprofile

Graphic Designer

Sableyes

Sabbles woz 'ere

518-songofmypeople

A town everyone hates, yet no one leaves...

Attila Ovari

Loving Life and Inspiring Others

Augusta Littleton

Nonprofits and Charities

The Home Buyer Class Blog

What to know when buying a home

The Contractor's Cabinet

A Blog On Construction & More

Gamintraveler

Love, Travel Lifestyle and Destinations

kelzbelzphotography

My journey - The good, bad and the ugly

antryump

"A Blog worth reading "

john pavlovitz

Stuff That Needs To Be Said

Smart Discount Shop

Discover all the creative and ingenious ways to save money !

playwithlifeorg

4 out of 5 dentists recommend this WordPress.com site

ultimatemindsettoday

A great WordPress.com site

Vonj Productions

Bringing you love through spirit!

The Dystopian Nation of City-State

A cruel, futuristic vision created by science fiction authors James Courtney and Kaisy Wilkerson-Mills. ©2013-2016. All Rights Reserved. All writings available through Amazon.

Bubba Pigg

South' s Leading Anti- Intellectual: Wealthy in Common Sense and the Wisdom of Selfishness

@TheTexasBroker Blog

Real Estate Sales Houston Texas

The Travelling Pantry

Adventurous, Honest and Wholesome

Top 10 of Anything and Everything!!!

Animals, Gift Ideas, Travel, Books, Recycling Ideas and Many, Many More

meganelizabethmorales

MANNERS MAKETH MAN, LOST BOYS FAN & PERPETAUL CREATIVITY.

William the butler

Serving drinks since 1985

lauraagudelo272

This WordPress.com site is the bee's knees

Plutonium™ Paint

Ultra Supreme Professional Grade Aerosol Paint

Covered in Beer

by Thomas Cochran, Known Moron

Natalie Breuer

Natalie. Writer. Photographer. Etc.

Post it Notes from my Idiot Boss

delivered directly to my computer monitor on an all too regular basis...

Late Blooming Entrepreneurs

Making it big in business after age 40