24 Mar Hoping for a Government Deal
Mortgage bonds have been climbing higher the past couple of days, fueled by a strong commitment from the Federal Reserve to increase the liquidity in the mortgage bond market through purchases of mortgage backed securities. This seemingly open checkbook from the Fed will help lenders continue lending on mortgage loans. I realize this seems ridiculous. However, the buyers of mortgage debt have shrunk to dangerous levels, with many lenders completely running out of available warehouse money to lend. This has left many consumers unable to fund on their new mortgage, and therefore losing out on the opportunity of the low rate they hoped to get.
The US stock market is climbing higher on hopes that government leaders will reach a deal today to inject trillions of dollars into the US economy to help middle and lower class families face the hardships created by the shutdown. The back and forth arguing shows just how combative the two parties have become toward each other. Hopefully an agreement comes quickly and those who need help will get it. When the formal announcement is made, you can bet on stock celebrating. However, don’t be fooled by short term rises in the market. The real impacts of the shutdown are yet to be felt. Once people actually miss a payday, we will see many revolt and show anger toward the situation. This is about to get real political, real quick.
With bond prices near all time high levels, now is a great opportunity to lock.