As Bond Market Moves Lower…Home Loan Rates Move Higher
Former Federal Reserve member Frederic Mishkin “Fast Freddy” and PIMCO's Mohamed El-Erian were both on TV this morning June 9, 2009 confirming that the Fed is in a tough position. With home loan rates spiking considerably higher in the past few weeks, the Fed has to be concerned about how this may impact the economic recovery, but unfortunately the Federal Reserve may not be in the position to do much.
The main Culprit for the free fall in Bond prices is the Treasury bond auctions and the increased number of mortgage refinance transactions which have occurred these past few months due to lower interest rates. This means hundreds of Billions of dollars of new Bond supply has been added to the market.
Economics 101 tells us that anytime supply vastly exceeds demand, prices will move lower, and that's exactly what we are seeing. As Bond prices move lower, home loan rates move higher.
What this means is that rates are likely to move upward throughout the next months and time is short on taking full advantage of the low rates. Let's talk and make sure you have taken necessary actions for your own financial situation.
If current trends hold, rates will continue to go up.
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