Market Commentary 4.29.2012 : Lingering fears about the current weakness in the U.S. economy and Europe’s smoldering debt crisis will once again drive trading activity in the mortgage market this week.
Any news that undermines confidence in the economy or in the financial system will hurt stock prices and spur mortgage investors to nudge rates fractionally lower. Better-than-expected economic news will nudge stock price higher at the expense of higher mortgage rates.
Investors of every description are looking for signs that leaders, in Washington or at the Fed, are going to create a viable plan to revitalize the ailing economy. So far that leadership has yet to materialize – and until it does – mortgage interest rates will likely churn up and down in a very tight range.
It is worth noting that yields on everything from Treasury debt obligations to mortgage-backed securities are once again approaching the point where investing in these instruments creates only a slightly better return for investors than stuffing money under a mattress. Dramatically lower mortgage interest rates will likely soon be considered by the majority of investors to be pointless – or dangerous -- or dangerously pointless. If investors can’t get the risk adjusted “bang-for-the-buck” they are looking for in the mortgage market – they will begin to look at alternative assets like high quality corporate debt obligations. Heads up.
