State of the Market: mortgagegreen announcement: June 4, 2009mortgagegreen announcement: June 4, 2009
State of the Market
(Emerson, Patrick: mortgagegreen, inc.)
Wednesday, May 27th 2009 marked the bond market's worst one-day performance since last October: loosing an astonishing 206bp (basis points). So what caused this free fall in bond values, and upsurge in mortgage rates? Too much supply and not enough demand--too many being issued and not enough being purchased.
Hundreds of billions of dollars in new bond notes have been caused by two things: increased number of refinance transactions and treasury auctions for new money. Driven by basic Keynesian economic theory, where price follows demand; as the supply of bonds moved higher, their demand moved lower (and so did their price)-thus making the home loan rates move higher.
Unfortunately for all of us, this trend is not likely to end anytime soon, as the treasury will be forced to continue and generate more bonds to pay for stimulus initiatives, bail-outs, etc. Bottom line - interest rates are likely to continue to rise, but are still near historic lows. Please contact a mortgagegreen associate to discuss things and make sure you have taken the actions necessary to benefit your real estate / portfolio investments.
Reference Points:
http://www.morganstanley.com/views/gef/index.html
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