We had another rough day in the bond and Mortgage interest rate markets last Friday, still trying to wrap my head around what happened. Last week we had virtually no domestic news capable of disrupting the market, but apparently some moves by Japan to weaken their currency worked against our bond market. Because of this, traders were selling their US bonds heavily on Friday and weaker demand for US Treasury and MBS bonds means rates edge up. The two month rally that took interest rates back down to historic lows is most likely over, sparked by the better than expected April employment data and confirmed by traders moving out of bonds. A Tweet last Friday from PIMCO CEO and bond king Bill Gross declared the end to the declining interest rate rally, even though only a month ago Gross said he was increasing PIMCO’s investment in US notes and bonds. Talk about a sudden change in sentiment.
Stepping back to put this all into perspective, interest rates are still phenomenal. Buying stock at cyclical bottoms, or obtaining a mortgage at THE historic low can only be known after the moment is in the rear view. One year ago it was mind blowing to lock a 30yr fixed mortgage at 4% with no points. Two years ago we were locking at 5%. Today we are floating around 3.625%. Not bad.
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