RateWatch 10 Feb – Now I’m starting to wonder

Markets: We’re down 12 bps (to explain again, this means that the 4.5% FNMA mortgage-backed bond is down .12 points (whoops, just ticked down to .06, so we’re moving in the right direction)).  As that bond moves, so move interest rates, in the opposite direction.  As the bond moves up, rates move down.  As the bond moves down, rates move up.  This move today is the third straight one in a negative direction, meaning that rates are edging higher.  The move is not strong, but it’s definite.

Analysis: Or is it?  Previous to this, we had three straight green days, or rates moving in a positive direction.  new home sales and existing home sales have been a bit weak as prices begin to rise (and folks, prices ARE beginning to rise, especially in places like LA and Las Vegas, where the crash has been especially severe.  I think that we’re seeing some artificial boost from the tax credit, so Heaven knows how bad the existing  home sales would be without that.  Any weakness in the economy right now means good things for bonds and good things for interest rates.

Everyone is looking for evidence that the Fed mortgage-backed security purchase phase-out (expected the end of March) is going to substantially boost interest rates.  As I’ve written in this space before, I’m not sure that’s going to happen.  Generally, bond traders are able to read the paper, and they know better than we do that the Fed move is coming.  Also generally, when news comes out, markets are really, really fast to price it in.  So why, if bonds are going to get crushed in April without the Fed to prop them up, are bonds not getting at least partially crushed NOW?

I keep looking for signs that the selloff is starting.  Is the last 3 days’ movement a sign of that?  I don’t know.  But I am starting to wonder.  If it continues all week, I’m going to get suspicious.

And, of course, I’ll report those suspicions to you.

Action: If you’re looking for a house or trying to get refinanced, you need to have the throttle wide open and be moving forward rapidly.  Get with your mortgage professional and get something in motion right now.  Do NOT wait on this.  As tight as lenders have been recently, and as much as things have changed with loan programs, assuming you’re going to walk in my office and walk out an hour later with a loan is delusional.

For those hoping to take advantage of the tax credit, I have a full cheat-sheet on how that credit works posted here.  Read carefully.

More as events warrant.

Cj

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