For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.
By G. Steven Bray
Bond markets continue pretty much to ignore US economic data. The data, especially employment data, has been generally positive, which typically would push rates up. Instead, rates have moved to their lowest levels of the year. So what’s driving them?
It seems to be combination of factors. I suspect the most influential is general uncertainty. While the US economy seems to be stable, other world economies, especially those in Europe, are collapsing. The US isn’t an island, and what happens elsewhere will have some spillover effect here at home. Add to that the various military actions and the Ebola scare, and investors have reason to worry a bit. As we’ve discussed before, uncertainty helps keep rates low.
Another factor may be the US housing market. While the rest of the economy seems to be improving slowly, housing is stuck. With mortgage originations very low, it doesn’t take much demand for mortgage securities to keep rates low.
A final factor may be the market itself. Many bond investors bet against falling interest rates, but as rates have fallen, they’ve been forced to buy bonds to cover their positions. Buying bids up bond prices, which means lower rates.
If you’re floating your rate hoping rates will go lower, keep in mind that resistance to lower rates is probably a lot greater than resistance to higher rates. I suggest you decide a bail out point. If rates start to rise, be ready to act quickly.
Sorry, the comment form is closed at this time.