Fewer participants and an unwillingness on the part of financial institutions to carry additional mortgage paper on their balance sheets due to capital constraints. Lord knows they are already chocking on >$5 trillion of this stuff.
Also, an absence of foreign interest in the mortgage backed securities market which were in no small way responsible for maintaining rates at historically low levels in the past few years.
Lets not forget all the money the government is printing for the bailouts... this could eventually skyrocket treasuries and make mortgage rates spike. The government making the situation worse? who would have thought..
Man, what a mess. I'm also concerned about the Treasury curve steepening significantly over the next 1-2 years as the Feds cram all this bail out paper down investors' throats.
New program initiatives by new either candidate and the raising of top marginal federal tax rates will also not help any of this taxable junk. Oops, I meant paper. :)
Yes, rates have been skyrocketing. Rates have to come back down or its going to put the housing market at an even more stand still. sunny_hong@countrywide.com
Umm, understand how this mess affects the long end of the curve! How many times do I have to say it and write about it on urbandigs!
The govt can NOT control 10,20,30 yr Treasury yields! They can control short end. The end game to all this issuance, all this debt, all these bailouts, this whole mess will affect the long end of the curve!
That means higher rates! You havent seen anything yet if this theory plays out! Its an unintended consequence of govt intervention!
If you want to stay on Streeteasy, go read the last 7-10 comments on this GOLD THREAD to see why the long end is acting the way it is. Very savvy traders are shorting the long end of the curve for past 3-6 months for a multi-year trade. All we need is credit worthiness of USA to be questioned, friendly funders to become not so friendly, funders to dump their treasury holdings, dollar to collapse, or massive supply to pop the 20 yr secular bull treasury market and you will see skyrocketing yields! Think of how this plays out in years to come for businesses/consumers. BIGGER PICTURE!
why do rates have to come down? Isnt it clear that everything the fed/treasury/govt have been doing has had no effect on rates?
The parabolic credit boom busted. This is one end result. People have it in their heads thet govt can save evertything and everyone. They have been behind the curve, thought the problem was contained, and are throwing everything thay have at this problem. I actually think the fed CP facility that will be up in about 1-2 weeks is the best direct action announced.
But there are no free lunches. There will be a price to pay for all this and that unintended consequence may be a popping of treasury bubble. Then rates will soar. This whole problem is so widely misunderstood. I suggest everyone here read MISH daily and educate themselves on whats happening so they stop making statements like 'they have to bring rates down'.
They tried! It didnt work because the problem is way too big for them. Time will heal the pain and I hope the unintended consequences of this medicine is not as bad as some fear. Some people saw higher yields coming many months ago because if good analysis. Most didnt.
If the long end of the curve does go up considerably, what does that mean? (in lay terms). High mortgage rates I know. High inflation? On the goods-price-increasing side, on the wages-paid side, or both?
I just dont see wage inflation or an expansion of credit/money supply in the near future. Any hyperinflation talk goes outside of that in my opinion and is as a result of all these global actions.
Borrowing costs rise across board. Currencies get debased. Commodities rebound, especially metals. I dont think it is good for equities because borrowing costs rise and goods prices could eventually rise again. Right now, commodity bubble burst and there is demand destruction everywhere. Deleveraging is occurring. Global economies are slowing big time, evidenced by falling commodities and shipping rates. But if reasearch & development is choked off, it could help to rebound commodities (energy) once economies start to see the light again.
Too many variables and we dont know what further actions will be taken. Just too early to tell. I got long stocks late last week, only 15%, but sold it late Monday and Tuesday AM. This market is nuts right now and we are about find out how deep and sever this slowdown is. It will last 2-4 quarters at least. I see the E in PE disappointing and capital spending coming down big time. This recession is very different than past ones because the consumer is debt ridden and credit is contracting. Deflation is the word for now.
If unemployment is going to rise to 9-10%, I dont see any fear of wage inflation. Goods are to connected to commodities market, and that has come down 40-50% in past few months. So that will offer some relief in near future, but is a minor silver lining and more evidence of the global slowdown story. You can be optimist and say gas prices are falling, OR you can be realist and say they are falling because world economies are slowing.
tech_guy, as UB stated, there is not much the govt. can do over the longer term to bring long Treasury int rates down as long as Congress maintains spending at super elevated levels relative to GDP. A cure for high rates are balanced budgets or at least demonstrating to the markets that conservative fiscal policies are in full force and effect. This is something Bill Clinton & Newt understood very well.
Government issuance of paper will be @ record levels++++++++ for several years to finance the cost of the bail-outs, recurring deficits plus as the US enters into recession, tax receipts fall like a stone placing further budgetary pressures/deficits that require additional financing (debt/GDP ratio). To successfully place the flood of new paper with the private sector, investors will demand higher rates of return (higher interest rates) specially at the intermediate and long dated maturities. BTW, this also applies to the individual states which are also hemoraging red ink.
Mortgage rates should escalate as they trade on a spread to the 10 yr treasury plus spreads are widening as investors are sick of MBS. As with Treasuries, mortgage securities must also be placed with the private sector at rates that are sufficiently attractive to lure investors. Sometimes it's 5.5% and sometimes it requires 8.5%.
Not good news for the stock market. Higher rates represent an attractive alternative to equities. PE multiples will contract as fixed income competes for fund flows.
When one is a heavy debtor nation, a deep recession does not necessarily translate to lower interest rates.
Sorry, this conversation is getting a bit too macro for me. I need a mortgage. I teed off that now that I am finally in range to lock a rate down, rates have spiked from 5.75 to 6.60% This has far reaching implications for me, as I am looking at a 10-15 year commitment (at least... possibly 30).
What the heck should I do? Should I lock now at a painfully high (compared to just 10 days ago) rate of 6.6?? If I wait, will I end up even worse off and have to choke down a 7.0% rate next week?
Unfortunately, I am dealing with a bank that does NOT offer free float downs. I suppose I can go elsewhere, but I have already paid for the credit check, application fee, etc, etc. Not sure how much, but I'm probably $600 in already, and would have to pay that all again to another institution to (potentially) get the same rate with a free floatdown.
What other options do I have? Should I try to delay the closing? We were trying to speed up the closing initially, but the @$^@# board only interviews once a month and we just missed the cutoff, so we have to wait an extra 30 days already. Take the rate now and plan to refi when rates come back down? But thats thousands of dollars (?) and a hell of a lot of hassle.
roy, how much is the loan amount? what is the purchase price? i'll send you a price quote and i'm a bank so i can have you closed in 7 days, no upfornt fees, no worries. Daniel. or you can call me direct at the office. 646-419-4192
IMO, shop it around. Yeah, you may lose $600, but that's a drop in the bucket. Try to get a 20 or 30 yr fixed rate (not adjustable). Very tough credit market. Good luck.
"I thought the bailout package and the government funds would LOWER interest rates. Instead, they are skyrocketing?"
So, did the government... and it isn't working much on the short end, so don't feel bad.
I found that the banks are looking for good risks to write mortgages, and the three I spoke with all offered one free float down. Seems like it would be worth another fee to give you an option in this volatile market. Or even tell your current bank you are going to walk, and they may change their mind.
We give free float down options. Timing is key in this volatile market. If rates drop you have the option to float down. Banks are offering this because of the volatility in the market. Talk to several different lenders and do not commit to any fees until one is offering the rate you feel comfortable with. We can reimburse your $600. sunny_hong@countrywide.com
Mortgage Rates
What the heck happened to mortgage rates?
6.6? Holy moly it was 5.8 less than a week ago!
I thought the bailout package and the government funds would LOWER interest rates. Instead, they are skyrocketing?
Fewer participants and an unwillingness on the part of financial institutions to carry additional mortgage paper on their balance sheets due to capital constraints. Lord knows they are already chocking on >$5 trillion of this stuff.
Also, an absence of foreign interest in the mortgage backed securities market which were in no small way responsible for maintaining rates at historically low levels in the past few years.
Liquidity out there is very tight as is capital.
Lets not forget all the money the government is printing for the bailouts... this could eventually skyrocket treasuries and make mortgage rates spike. The government making the situation worse? who would have thought..
bugelrex, good point.
Man, what a mess. I'm also concerned about the Treasury curve steepening significantly over the next 1-2 years as the Feds cram all this bail out paper down investors' throats.
New program initiatives by new either candidate and the raising of top marginal federal tax rates will also not help any of this taxable junk. Oops, I meant paper. :)
Don't you worry. The government has a plan for what to do with all that junk. Abolish 401k's and force all Americans to buy treasury bonds instead:
http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20081012/REG/310139971
And so the next bubble begins...
Yes, rates have been skyrocketing. Rates have to come back down or its going to put the housing market at an even more stand still. sunny_hong@countrywide.com
Umm, understand how this mess affects the long end of the curve! How many times do I have to say it and write about it on urbandigs!
The govt can NOT control 10,20,30 yr Treasury yields! They can control short end. The end game to all this issuance, all this debt, all these bailouts, this whole mess will affect the long end of the curve!
That means higher rates! You havent seen anything yet if this theory plays out! Its an unintended consequence of govt intervention!
If you want to read more about this go :
http://www.urbandigs.com/2008/10/a_new_age_depression.html
http://www.urbandigs.com/2008/08/peak_credit_what_that_may_mean.html
If you want to stay on Streeteasy, go read the last 7-10 comments on this GOLD THREAD to see why the long end is acting the way it is. Very savvy traders are shorting the long end of the curve for past 3-6 months for a multi-year trade. All we need is credit worthiness of USA to be questioned, friendly funders to become not so friendly, funders to dump their treasury holdings, dollar to collapse, or massive supply to pop the 20 yr secular bull treasury market and you will see skyrocketing yields! Think of how this plays out in years to come for businesses/consumers. BIGGER PICTURE!
http://www.streeteasy.com/nyc/talk/discussion/5195-cramer-says-to-buy-gold
*go back to 6 days ago where MMafia and I discussed the gold trade and the short long end of curve trade
why do rates have to come down? Isnt it clear that everything the fed/treasury/govt have been doing has had no effect on rates?
The parabolic credit boom busted. This is one end result. People have it in their heads thet govt can save evertything and everyone. They have been behind the curve, thought the problem was contained, and are throwing everything thay have at this problem. I actually think the fed CP facility that will be up in about 1-2 weeks is the best direct action announced.
But there are no free lunches. There will be a price to pay for all this and that unintended consequence may be a popping of treasury bubble. Then rates will soar. This whole problem is so widely misunderstood. I suggest everyone here read MISH daily and educate themselves on whats happening so they stop making statements like 'they have to bring rates down'.
They tried! It didnt work because the problem is way too big for them. Time will heal the pain and I hope the unintended consequences of this medicine is not as bad as some fear. Some people saw higher yields coming many months ago because if good analysis. Most didnt.
If the long end of the curve does go up considerably, what does that mean? (in lay terms). High mortgage rates I know. High inflation? On the goods-price-increasing side, on the wages-paid side, or both?
What would it mean for the stock market?
I just dont see wage inflation or an expansion of credit/money supply in the near future. Any hyperinflation talk goes outside of that in my opinion and is as a result of all these global actions.
Borrowing costs rise across board. Currencies get debased. Commodities rebound, especially metals. I dont think it is good for equities because borrowing costs rise and goods prices could eventually rise again. Right now, commodity bubble burst and there is demand destruction everywhere. Deleveraging is occurring. Global economies are slowing big time, evidenced by falling commodities and shipping rates. But if reasearch & development is choked off, it could help to rebound commodities (energy) once economies start to see the light again.
Too many variables and we dont know what further actions will be taken. Just too early to tell. I got long stocks late last week, only 15%, but sold it late Monday and Tuesday AM. This market is nuts right now and we are about find out how deep and sever this slowdown is. It will last 2-4 quarters at least. I see the E in PE disappointing and capital spending coming down big time. This recession is very different than past ones because the consumer is debt ridden and credit is contracting. Deflation is the word for now.
If unemployment is going to rise to 9-10%, I dont see any fear of wage inflation. Goods are to connected to commodities market, and that has come down 40-50% in past few months. So that will offer some relief in near future, but is a minor silver lining and more evidence of the global slowdown story. You can be optimist and say gas prices are falling, OR you can be realist and say they are falling because world economies are slowing.
tech_guy, as UB stated, there is not much the govt. can do over the longer term to bring long Treasury int rates down as long as Congress maintains spending at super elevated levels relative to GDP. A cure for high rates are balanced budgets or at least demonstrating to the markets that conservative fiscal policies are in full force and effect. This is something Bill Clinton & Newt understood very well.
Government issuance of paper will be @ record levels++++++++ for several years to finance the cost of the bail-outs, recurring deficits plus as the US enters into recession, tax receipts fall like a stone placing further budgetary pressures/deficits that require additional financing (debt/GDP ratio). To successfully place the flood of new paper with the private sector, investors will demand higher rates of return (higher interest rates) specially at the intermediate and long dated maturities. BTW, this also applies to the individual states which are also hemoraging red ink.
Mortgage rates should escalate as they trade on a spread to the 10 yr treasury plus spreads are widening as investors are sick of MBS. As with Treasuries, mortgage securities must also be placed with the private sector at rates that are sufficiently attractive to lure investors. Sometimes it's 5.5% and sometimes it requires 8.5%.
Not good news for the stock market. Higher rates represent an attractive alternative to equities. PE multiples will contract as fixed income competes for fund flows.
When one is a heavy debtor nation, a deep recession does not necessarily translate to lower interest rates.
Sorry, this conversation is getting a bit too macro for me. I need a mortgage. I teed off that now that I am finally in range to lock a rate down, rates have spiked from 5.75 to 6.60% This has far reaching implications for me, as I am looking at a 10-15 year commitment (at least... possibly 30).
What the heck should I do? Should I lock now at a painfully high (compared to just 10 days ago) rate of 6.6?? If I wait, will I end up even worse off and have to choke down a 7.0% rate next week?
Do they give rate-locks with float-downs these days?
Unfortunately, I am dealing with a bank that does NOT offer free float downs. I suppose I can go elsewhere, but I have already paid for the credit check, application fee, etc, etc. Not sure how much, but I'm probably $600 in already, and would have to pay that all again to another institution to (potentially) get the same rate with a free floatdown.
What other options do I have? Should I try to delay the closing? We were trying to speed up the closing initially, but the @$^@# board only interviews once a month and we just missed the cutoff, so we have to wait an extra 30 days already. Take the rate now and plan to refi when rates come back down? But thats thousands of dollars (?) and a hell of a lot of hassle.
roy, how much is the loan amount? what is the purchase price? i'll send you a price quote and i'm a bank so i can have you closed in 7 days, no upfornt fees, no worries. Daniel. or you can call me direct at the office. 646-419-4192
Daniel.Ledven@stanleycapital.com
roy,
IMO, shop it around. Yeah, you may lose $600, but that's a drop in the bucket. Try to get a 20 or 30 yr fixed rate (not adjustable). Very tough credit market. Good luck.
"I thought the bailout package and the government funds would LOWER interest rates. Instead, they are skyrocketing?"
So, did the government... and it isn't working much on the short end, so don't feel bad.
I found that the banks are looking for good risks to write mortgages, and the three I spoke with all offered one free float down. Seems like it would be worth another fee to give you an option in this volatile market. Or even tell your current bank you are going to walk, and they may change their mind.
We give free float down options. Timing is key in this volatile market. If rates drop you have the option to float down. Banks are offering this because of the volatility in the market. Talk to several different lenders and do not commit to any fees until one is offering the rate you feel comfortable with. We can reimburse your $600. sunny_hong@countrywide.com
this thread is fast becoming a center for personal business marketing