WOW...more parking of money in the bond market gave us some bounce after yesterday's drop in pricing for the FNMA 4.5% bond. The security is UP 28 bps on the day trading at $102.03
Why do we watch this bond?
Right now: the 4.5% represents mortgages that have been converted to securities and have rates in the 5% range. This is really close to where the mortgages we are writing today and will be made into securities later are priced.
As mortgage interest rates go up: we watch different bonds. When rates were 6.5%-ish for example: we were watching the 6% bond.
When mortgage bonds are selling readily: effectively little pieces of mortgages that have been securitized into bonds are selling readily. It is demand for those securities that allows agencies to offer lower rates. When demand wanes, the agencies offer higher rates of return to investors.
When mortgage bonds are selling, they get more expensive to buy and rates go DOWN...
When mortgage bonds are not selling, and their pricing deteriorates rates go UP.
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Chad Schauers
Montana Mortgage Lender, Bozeman, Montana
Personal Cell: 406 799 8613
Personal Email: metchad@gmail.com
