FNMA 4.5% bond is up 38 bps with just a few minutes left in the session. This thing is trading at $100.91 so still in a range to support rates on the 30 year fixed product under 5% for borrowers who meet the required qualifications.
STILL: fear money is flowing into our markets. The "fear" money has replaced the Fed money that was keeping rates low.
One reason for all this money coming in: Currency value projections.
Many are wondering about the value of the Euro in the future. Remember: a currency's value is determined in part by the projection of what it is going to do in the future.
Think about it this way: Lets say a year ago it took $1.50 in US dollars to purchase one Euro...so you could purchase your investment. If you purchased $1000 Euros worth of something THEN: your investment would be $1500 US dollars back then.
If the investment was offering a return of 10% for the year you would "make" 100 Euros...so you would "OWN" 1100 Euros.
(10% return on investment is GREAT, right?)
However, If you own 1100 Euros today and converted it BACK into US dollars today: It would only be worth $1342. Bummer to invest $1500 US dollars and cash in after a guaranteed 10% return only to lose money. The exchange today is one US dollar to 1.2208 Euros.
Imagine if it were the other way around? YOU were investing in a currency that was GROWING in value VS. your own currency. You would be the WINNER in that scenario. Investors want to be winners, so they put their money where they think they will win. This is why currency values in relation to other currency is so important to take note of.
Until the European Union gets its reputation back: money will be parked elsewhere. Remember though: this is a temporary parking spot for the most part vs. long-term investments. It is getting to the point where the bonds are really getting oversold. We want to keep our eyes on the future but also take advantage of the rates and opportunity available to us now.
HOUSING STARTS are UP! Housing starts beat estimates by about 5.8% this morning. A housing start is a "hole" in the ground. Building permits were down however.
For more commentary visit http://www.bozemanmortgageblog.com
Cheers!
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Chad Schauers
Montana Mortgage Lender, Bozeman, Montana
Personal Cell: 406 799 8613
Personal Email: metchad@gmail.com
