Posted by: cfigueira | May 10, 2010

Mortgage bond prices

Mortgage bond prices opened sharply lower Monday morning driving mortgage rates higher. Rates are under pressure following a financial lifeline thrown to Europe from the EU.

This weekend the Europe Union (EU) announced a rescue package to help stabilize Greece and other countries that share the common currency the Euro. The package totals almost $1T (one trillion, sound familiar?) US dollars. The European Central Bank (ECB), the Feds counterpart in the Euro Zone, will purchase bonds from both governments and private placements in an effort to stabilize rates (sound familiar?). This effort has removed the flight-to-safety bid that MBS’s and Treasuries enjoy when a global crisis erupts.

For months, global traders have grown more concerned with the possibility of a debt default from Greece, Spain, Portugal and Ireland. With an issue as complex as this, you can expect it to have an effect on mortgage rates for a long time. This is not going to go away quietly.

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