Bonds Get (Temporary) Boost

Mortgage bonds are climbing higher this morning, in what I believe could be a short-lived improvement to pricing.  The move was sparked by fear that Italy could default on its debt, which is something that would have impacted the bond market sooner had that been a legitimate and long term concern. The news out of Italy isn’t new.  In fact, it has been speculated for a while.  Just because talks have intensified isn’t reason for investors to suddenly be concerned. Therefore, it seems to be more of a distraction vs something that will have a long term benefit to mortgage interest rates.

The 10 Year Treasury Note yield has fallen beneath the critical 3.04% level. If this actually holds, it would be a very strong sign for mortgage interest rates. However, as you can see from above, I believe this move will be short lived and not something we can plan on lasting. It is likely that bonds will soon break above this level once more and continue to climb in the weeks to come. At some point the U.S. economy will stall and interest rates will improve. However, that time may not be soon and rates could move a bit higher in the meantime.

Later today, the FOMC will release the minutes from the most recent Fed meeting.  Although bond holders are hoping for a bearish tone, it’s not likely the hope will become reality. Overall, the US economy continues to strengthen.  This will likely reflect in the sentiment of the minutes. Further, the bond market typically doesn’t react well to Fed Meeting minutes. So we could see this morning’s improvements dwindle following the release.

Now is a great time to lock.