Posts Tagged ‘Quantitative easing’

Market recap for week ending 9/14/2012

Posted on: September 14th, 2012 by Fred Bohman No Comments

This week was a good week for mortgage interest rates with most of the action happening yesterday.

Up until yesterday the mortgage bond market was flat this week with investors waiting for the Federal Reserve board (FED) to finish their meeting discussing our economy and how to help it recover. At the end of the meeting the President of the FED Ben Bernanke announced that they will launch another round of quantitative easing to help stimulate the economy. This will be the 3rd round of easing, but the most important one for mortgage rates so far.

Quantitative easing is supposed to stimulate the economy by keeping interest rates low. In the past rounds of easing the FED has tried to bring down rates by buying mortgage backed securities and Treasury bonds. In this round they announced that they will solely focus on mortgage backed securities and that they will be buying $40 Billion a month for an open ended term.

The fact that this round is focusing on mortgage backed securities and will continue for as long as the FED seems fit is what caused the strong rally in the mortgage bond market which caused rates to drop. Even though we saw a big rally in the mortgage bond market many lenders didn’t drop their rates a proportionate amount. This often happens because lenders don’t want to drop their rates too quickly because they are afraid that all the borrowers that are already locked in and in underwriting will cancel their applications and start over.

Market recap for week ending 8/31/2012

Posted on: August 31st, 2012 by Fred Bohman No Comments

Market recap for week ending 8/31/2012

This week was a relatively calm week for mortgage rates compare to recent weeks. As of this morning rates were slightly better than they were Monday morning and by the end of today they ended up about .25% better than Monday.

This morning the Federal Reserve Bank(FED) President Ben Bernanke held his long awaited opening speech at the Jacksonhole conference. The reason this speech was so anticipated was because investors were waiting to see if Bernanke would reveal any details in regards to another quantitative easing program. As I have mentioned in my previous articles another easing preprogram would stimulate the economy by having the FED purchase additional Treasury bonds and mortgage backed securities which in turn would bring down interest rates and the cost of borrowing which in theory would cause people to spend more money and stimulate the economy.

Like many times when Bernanke speaks he said a lot without giving any details. In today’s speech he did not give any details about another easing round but he did mention that the FED is ready to ease if they see the need to. Apparently that was enough for investors, because we saw a big rally in the bond market after the speech. Once again a rally in the bond market equals lower interest rates.

In Europe this week leaders have continued on working on a plan to solve their debt problem. Germany is still showing some opposition to the current plan, but they are not as strongly opposed to it as they were. The German court is to rule on whether it is legal or not for the European Central Bank (ECB) to buy bonds from struggling EU countries on September 12th . The reason Germany has so much to say in the matter is that they are the largest economy in Europe and there for has most of the money. Once again the reason this affects mortgage rates is that when Europe is in trouble investors move their money to safer US investments driving down our rates.