Mortgage News

The stock market has rallied for over two months while oil prices have risen. It is not surprising that the market paused to take a breather in the middle of this past month. The reports were fairly negative with higher jobless claims and slower than expected retail sales. Even the good news, slow consumer inflation, was indicative of a slower economy. The markets have been reacting positively through a lot of negative economic news. Why pause now?

It would not be out of the question to view this period as a breather or period of consolidation. The markets are not likely to turn back down unless there are some really surprising negative statistics. We don't rule that out. For now, the breather and lower rates are a great opportunity for homeowners and consumers to take advantage of what might be the last chance to obtain the lowest rates of our generation. At this point rates on home loans have stayed steady despite higher rates on Treasurys and that can't last forever.

Can the Federal Reserve Board keep the rates on Treasuries down? The Fed has been buying U.S. Treasurys in the past several weeks in order to do just that. A day before the Fed said on March 18 that it would begin buying Treasurys, the yield on the 10-year was about 3.0%. Following the announcement, bonds rose and the yield fell to about 2.5%, exactly what the Fed wanted. The Fed's success was temporary though. Even though the Fed reiterated it would finish purchasing $300 billion in Treasurys by this autumn, the 10-year sell-off continued until the yields again crossed over the 3.0% mark. The slow economy and government support both will serve to keep rates down. Meanwhile, government spending to spur the economy will cause rates to increase. The tug of war continues...