Saturday, August 22, 2015 - Article by: Bart Castelli - Homestar Financial Corporation NMLS #70864 -
Mortgage rates moved moderately lower yet again today. At the heart of the matter are concerns that the global economic growth outlook may be dimming. That's a scary thought considering Europe is in the midst of ongoing quantitative easing and that China has taken somewhat desperate steps to bolster its economy and markets. Top that all off with the absence of QE in the US as well as the Fed's rate hike rhetoric and all the ingredients are there for market participants to wonder how bad things might look after the various extraordinary interventions around the world are curtailed.
Tons of support for the benchmark MBS today with the perfect micro-brew today of a massive stock market selloff, and oil dropping briefly below $40. Even with this massive sell off today, one would anticipate the bond market do extremely well - but with all the jittery out there, gains are hard to come by right now. The lack of response in bond markets could be explained by the fact that the winning streak is as long as it is. After a certain point, it takes more and more bad economic news for rates to continue to fall.
In summary, it has been a nice week for rates and bonds. We are nearing our lowest rates since late April, and it seems doubtful that China/other world economies will overcome head winds in the next couple of weeks. While I would like to see bonds rally further as stocks dive, the gains we have logged are pretty impressive. Floating has been rewarding, and locking is a reality. If you can tolerate the risk, it might just proof to be beneficial, but an old saying that I have not stated here lately is all the same, Pigs Get Fat and Hogs Get Slaughtered.
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