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How or Why do rates move?

Sunday, May 29, 2011 - Article by: BEDROCK LENDING - Message

With rates dipping down near all time lows- I have been asked a lot lately as to why they are dipping or what makes them go up and down? Well mortgage rates fluctuate daily based off of the mortgage backed securities markets and those markets tend to follow the US treasury markets, more specifically the 10 yr bond yield(rate). Now the bond market historically has had an inverse relationship to the stock market, basically if you didn't think the economy was improving or growing at a rapid enough pace then you would probably not by stocks and instead you would invest in treasury bonds. When you buy bonds the price of that bond goes up and the yield or rate of yield drops. Well, here recently we have seen poor GDP numbers(which measures the growth of our economy) and higher jobless claims(which means unemployment is not getting any better); so those two factors in the past few weeks has had a major impact on the 10 yr bond yield, as it is at it's lowest yield since last Dec(2010), translating into lower mortgage rates.

-Sonny Baker

Bedrock Lending

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