"Fear comes from uncertainty," wrote the poet William Congreve. Last week, however, the markets were moved by fear and by uncertainty that were unrelated. On the one hand, unrest in the Middle East drove up Oil prices and pushed investors into the safety of Bonds - while on the other hand, fear of inflation limited the gains that Bonds experienced. To see how those elements impacted home loan rates, let’s take a deeper look at each.
First, the global unrest in the Middle East continues to impact the markets. The protests that started a few weeks ago in Tunisia and Egypt have now spread to Bahrain, Yemen and Libya. Libya is of particular concern to the markets, since it is the largest holder of oil reserves in Africa.
With the thought of Oil fields at risk and with no foreseeable resolution in the near term, Oil spiked as much as $12 a barrel higher last week - climbing over the mark of $100 per barrel. Remember, high oil prices aren't good for anything; they’re tough on the economic recovery, and they’re inflationary. And in terms of your wallet, the recent spike in oil has only just begun to translate to pumps across the country, so you can expect to see higher prices in the coming weeks.
In addition to higher Oil prices, the unrest is creating fear and doubt in Traders’ minds about what might happen. And when Traders are uncertain, they tend to move money into the relative safety of Bonds, which offer lower returns but also lower risks. This flood of money into Bonds - including Mortgage Bonds - helps prices and home loan rates improve. And sure enough, last week Mortgage Bonds traded higher, as protests and uncertainty permeated throughout the Middle East.
On the other hand, those gains in Bonds have been limited by fears of inflation down the road. That’s because investors demand a higher yield now to offset their concerns that future inflation will eat into their returns. That was evidenced by the tepid buying demand in last week's Treasury auctions. And as the economy continues to slowly expand and inflation fears grow, rates will gradually move higher over time.
The bottom line is that global unrest has been a driving force behind improvement in the Bond market... and that it may continue to do so in the coming weeks. But at the same time, it’s important to remember that those gains are fleeting and have even been limited by inflation fears - so the positive picture for Mortgage Bonds and home loan rates won’t last long.
Now’s the time to look at your unique situation and take action. It only takes a few moments to sit down and see how the national and international news may help you benefit from a refinance or the purchase of a new home. Call or email today to get started. Or forward this newsletter on to someone you know who may benefit from today’s historically low rates.
Colleen Mitchell
Home Mortgage Consultant
Wells Fargo Home Mortgage
Weekly Newsletter
First, the global unrest in the Middle East continues to impact the markets. The protests that started a few weeks ago in Tunisia and Egypt have now spread to Bahrain, Yemen and Libya. Libya is of particular concern to the markets, since it is the largest holder of oil reserves in Africa.
With the thought of Oil fields at risk and with no foreseeable resolution in the near term, Oil spiked as much as $12 a barrel higher last week - climbing over the mark of $100 per barrel. Remember, high oil prices aren't good for anything; they’re tough on the economic recovery, and they’re inflationary. And in terms of your wallet, the recent spike in oil has only just begun to translate to pumps across the country, so you can expect to see higher prices in the coming weeks.
In addition to higher Oil prices, the unrest is creating fear and doubt in Traders’ minds about what might happen. And when Traders are uncertain, they tend to move money into the relative safety of Bonds, which offer lower returns but also lower risks. This flood of money into Bonds - including Mortgage Bonds - helps prices and home loan rates improve. And sure enough, last week Mortgage Bonds traded higher, as protests and uncertainty permeated throughout the Middle East.
On the other hand, those gains in Bonds have been limited by fears of inflation down the road. That’s because investors demand a higher yield now to offset their concerns that future inflation will eat into their returns. That was evidenced by the tepid buying demand in last week's Treasury auctions. And as the economy continues to slowly expand and inflation fears grow, rates will gradually move higher over time.
The bottom line is that global unrest has been a driving force behind improvement in the Bond market... and that it may continue to do so in the coming weeks. But at the same time, it’s important to remember that those gains are fleeting and have even been limited by inflation fears - so the positive picture for Mortgage Bonds and home loan rates won’t last long.
Now’s the time to look at your unique situation and take action. It only takes a few moments to sit down and see how the national and international news may help you benefit from a refinance or the purchase of a new home. Call or email today to get started. Or forward this newsletter on to someone you know who may benefit from today’s historically low rates.
Colleen Mitchell
Home Mortgage Consultant
Wells Fargo Home Mortgage
Weekly Newsletter
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