Why Mortgage Rates Are Going to be Higher Tomorrow…..

by Tom on June 18, 2009
in Market Musings

If today’s market movements tell you one thing, they should tell you this:
The Bond Market is spooked by how much money the government is borrowing.

Let me elaborate:

Interest rates were going down.
Some economic reports came out but they were relatively minor reports that wouldn’t have a major market moving impact.
The government announces that they are going to auction off $104 Billion in Treasuries next week.
They auctioned off $65 Billion in Treasuries last week.
That’s a 60% increase in government borrowings between last week and this week.

What does the bond market do? The 30 year mortgage bond finishes the day down substantially (remember, price goes down -> Rate goes up) from the day before.

The bond market does not like how much the government is borrowing, so it’s putting upward pressure on rates.

I’ll have more tomorrow – but tomorrow’s Mortgage Market Week in Review will be talking a lot about two main things: 1) Pending financial regulations and 2) Treasury market movements and how they both affect the mortgage market.

Never a dull moment!

Tom Vanderwell

Treasury prices retreat on auction announcement, stock rally – Jun. 18, 2009

Treasury prices tumbled Thursday after the government announced $104 billion in debt auctionsSupply: The government, which has recently issued record amounts of debt to fund the economic stimulus effort, announced $104 billion in 2-, 5- and 7-year auctions scheduled for next week.

Last week, the market absorbed $65 billion in debt.

Mortgage Rates