How do you stimulate the economy without spending any money? You do the twist and shuffle. The Federal Reserve announced Wednesday that it would engage in a new policy known as “Operation Twist,” consisting of selling shorter-term Treasuries and using the proceeds to buy longer-term government bonds. The Mortgage Bond markets soared today after the surprise announcement from the Fed saying that it will be purchasing agency Mortgage Backed Securities from the principal payments from its holdings of agency debt and agency Mortgage Backed Securities in agency Mortgage Backed Securities. The move took players by surprise in a big way. The 3.5% coupon jumped 134bp to end at an all-time high of 103.00 The next few trading days will determine if we switch over to the 3% coupon, which finished at 99.81 up 134bp today.Stocks plunged after the Fed statement read that there are significant downside risks to the economy. The Dow lost 283.82, the Nasdaq fell 52.05 to 2,538.19 while the S&P 500 Index dropped 35.33. Oil in after hours trading was last seen at $84.83/barrel down $2.09. Weekly claims will be released tomorrow.
Daily pricing for conforming A paper loans is determined by mortgage-backed securities, not the Treasury market. Mortgage companies watch the market trade until 10:00 a.m. ET before determining daily price changes. Most mortgage companies/wholesalers watch market activity for over an hour each day before setting daily pricing. Mortgage companies commonly set daily pricing at 10:00 am eastern.
The Treasury market opens at 8:30 am and the mortgage-backed securities begin to trade at approximately 8:40 am each day. Many economic reports are released at 8:30 am eastern time, so wide price swings are not uncommon directly following the market open There is an inverse relationship between the price of bonds and the movement of interest rates. As interest rates rise, the price of bonds falls and vice versa.
Staying in touch with your Maine Mortgage Banker is the key to locking in at the right time.
Maine Mortgage Rate Update for August 18, 2010
Here are some of the events affecting Maine mortgage rates today:
What Mortgage Backed Securities (MBS) Are Doing Today:
- The price of the FNMA 30-Year 4.0% MBS coupon opened at 102.44 this morning – the same as yesterday’s close.
- At 9:30 AM, the 4.0% MBS coupon was trading at 102.66 – up 7/32 from its opening.
Remember, on mortgage backed securities (MBSs), as the price goes up, the yield comes down – and so do mortgage rates. I expect that Maine mortgage rates will be about the same in price this morning as compared to yesterday.