Good News For Stocks Is Bad News For Bonds/Rates

January 25th, 2013

Interest rate

It looks like rates are edging up today, again. Here is this morning’s bond market update from MBS Online:

“MBS are down -13/32 (FNMA 30-yr 3.0 at 103.23), around 16/32 lower than yesterday at this time. Unfavorable repricing took place yesterday. Early investors may have priced at levels as high as -10/32.

Global investors have continued to shift to riskier assets today, pushing major US stock indexes to multi-year highs, and hurting bonds. Stronger than expected economic news from Europe was the main influence today. MBS prices have dropped to levels last seen in September. The Dow is up 50 points. New Home Sales will be released at 10:00 ET.”

And here is an update from this afternoon:

“An improving outlook for global economic growth caused investors to shift assets from bonds to stocks, reducing demand for long-term fixed-rate assets including mortgage-backed securities (MBS). As a result, mortgage rates ended the week a little higher. The global economic data released this week was encouraging. Important manufacturing reports in Europe and China exceeded expectations. In the US, Jobless Claims surprised investors for the second straight week. There is also a growing sense that the worst of the debt troubles for the European Union have passed. Stock markets around the world are hitting multi-year highs.

The Housing data released this week reflected solid year over year improvement. December Existing Home Sales were 13% higher than one year ago, to the highest level since 2007. Even though the total inventory of existing homes available for sale fell to the lowest level in years, the National Association of Realtors forecasts that Existing Home Sales will increase another 9% in 2013. December New Home Sales were nearly 20% higher than one year ago.”

It looks like the recent strength in the stock market has been hurting interest rates lately, and that is going to continue today.

Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.

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