This week was another good week for mortgage interest rates. Rates today are just under 1/8 of a percent better than they were on Monday. Ever since the Federal Reserve (FED) announced the 3rd round of quantitative easing we have seen rates improving.
Yesterday was the first day we saw rates increase in an 8 business day span, which is the longest span since rates declined in December 2008. When the FED announced that the new quantitative easing program was going to be focused on mortgage backed securities it caused a shift in investor mentalities. US treasury bonds were always the go to choice for investors because it is considered the safest investment out there. Now that the FED is heavily buying mortgage backed securities, investors are starting to see them as the safest investment and they offer a much higher rate of return than treasury bonds. It is because of this shift in investor mentality that we have seen such a long and strong rally in the mortgage bond market.
Another event fueling the mortgage bond rally is that Europe’s solution to solving their debt problem seems to be falling apart. This week we saw more riots in Greece and it is looking more likely they will exit the European Union. Also, Spain seems to be unwilling to accept the conditions that would come with the financial support from the European Central Bank (ECB).The reason all this affects us in America is because when Europe is in crisis mode investors get scarred and money flows into the mortgage bond and US treasury bond markets.
As mentioned above we did see a sell off yesterday in the mortgage bond market, but that is to be expected every now and then as the market never moves in a straight line. Both the technical and fundamental data looks good for rates moving into next week.
