1 (866) 861-5708

BETH HOFFMAN
BROKER/OWNER

 


   

 

1 (866) 861-5708

BETH HOFFMAN
BROKER/OWNER

 


   

 

Mortgage-Bond Yields Jump to Highest in Month After Jobs Data

Jody Shenn
Friday, December 4, 2009

 Yields on Fannie Mae and Freddie Mac mortgage securities climbed to the highest in almost a month amid signs the employment market is improving, signaling that interest rates on new home loans may extend a rebound from record lows.

The yield on Washington-based Fannie Mae’s current-coupon 30-year fixed-rate mortgage bonds climbed 0.08 percentage point to 4.25 percent at 4:36 p.m. in New York, the highest since Nov. 11, according to data compiled by Bloomberg. That’s up from 3.90 percent on Nov. 30, suggesting a similar rise in mortgage rates, which declined to a record low average in the latest week.
 
The gain today tracked an increase in Treasury yields, which climbed after a report that the U.S. economy lost fewer jobs than forecast last month with the unemployment rate falling to 10 percent. The Federal Reserve’s buying of $1.25 trillion of so-called agency home-loan securities has kept the gap between yields near the tightest on record for much of this year in a bid to revive home prices that may be succeeding.
 
“There will be much higher rates once the economy really starts to improve, but that’s going to be down the road,” Cameron Findlay, chief economist at Charlotte, North Carolina- based Tree.com Inc.’s LendingTree mortgage Web site unit, said in an interview. An unemployment measure that includes part-time workers that would prefer full-time jobs remains more than 17 percent, “which is exceptionally high.”
 
Yields on agency mortgage bonds are guiding rates on almost all new U.S. home lending following the collapse of the non- agency market in 2007 and a retreat by banks. The $5.4 trillion market includes securities guaranteed by government-supported Fannie Mae and Freddie Mac or federal agency Ginnie Mae.
 
Mortgage Rates
 
The average rate on a typical 30-year fixed-rate mortgage dropped 0.07 percentage point to a record 4.71 percent in the week ended yesterday, according to McLean, Virginia-based Freddie Mac. That was down from the year’s high of 5.59 percent in June. An S&P/Case-Shiller index for 20 metropolitan areas showed home values rose in each of the five months through September after a record 33 percent drop from a July 2006 peak.
 
“The housing market is in the early stage of recovery,” Glenn Schultz, a mortgage-bond analyst at Wells Fargo & Co. in Charlotte, North Carolina, wrote in a Dec. 2 report. “However, we believe that government support is likely needed through” the first half of next year “before the recovery will be self- sustaining.”
 
While lowering financing costs for home buyers, the recent decline in mortgage rates failed to spark the same level of refinancing of existing loans as seen earlier this year after most “highly qualified borrowers” already cut their costs, Credit Suisse Group analysts including Mahesh Swaminathan in New York wrote in a report yesterday.
 
Refinancings Decline
 
The Mortgage Bankers Association’s seasonally adjusted index of refinancing applications in the latest week was down 61 percent from a high this year in January.
 
“What you’re always going to find is mortgage companies are going to be quick to respond to negative news for the bond market and they will raise rates rapidly,” Findlay said.
 
The difference between yields on the Fannie Mae bonds and 10-year government notes tightened today by about 0.01 percentage point to 0.77 percentage point, Bloomberg data show. On Nov. 24, the spread was at 0.68 percentage point, the smallest since 1992.
 

Email Jody Shenn at jshenn@bloomberg.net
Copyright 2009 Bloomberg L.P.
This article appeared at http://www.bloomberg.com

Jody Shenn
Friday, December 4, 2009

 Yields on Fannie Mae and Freddie Mac mortgage securities climbed to the highest in almost a month amid signs the employment market is improving, signaling that interest rates on new home loans may extend a rebound from record lows.

The yield on Washington-based Fannie Mae’s current-coupon 30-year fixed-rate mortgage bonds climbed 0.08 percentage point to 4.25 percent at 4:36 p.m. in New York, the highest since Nov. 11, according to data compiled by Bloomberg. That’s up from 3.90 percent on Nov. 30, suggesting a similar rise in mortgage rates, which declined to a record low average in the latest week.
 
The gain today tracked an increase in Treasury yields, which climbed after a report that the U.S. economy lost fewer jobs than forecast last month with the unemployment rate falling to 10 percent. The Federal Reserve’s buying of $1.25 trillion of so-called agency home-loan securities has kept the gap between yields near the tightest on record for much of this year in a bid to revive home prices that may be succeeding.
 
“There will be much higher rates once the economy really starts to improve, but that’s going to be down the road,” Cameron Findlay, chief economist at Charlotte, North Carolina- based Tree.com Inc.’s LendingTree mortgage Web site unit, said in an interview. An unemployment measure that includes part-time workers that would prefer full-time jobs remains more than 17 percent, “which is exceptionally high.”
 
Yields on agency mortgage bonds are guiding rates on almost all new U.S. home lending following the collapse of the non- agency market in 2007 and a retreat by banks. The $5.4 trillion market includes securities guaranteed by government-supported Fannie Mae and Freddie Mac or federal agency Ginnie Mae.
 
Mortgage Rates
 
The average rate on a typical 30-year fixed-rate mortgage dropped 0.07 percentage point to a record 4.71 percent in the week ended yesterday, according to McLean, Virginia-based Freddie Mac. That was down from the year’s high of 5.59 percent in June. An S&P/Case-Shiller index for 20 metropolitan areas showed home values rose in each of the five months through September after a record 33 percent drop from a July 2006 peak.
 
“The housing market is in the early stage of recovery,” Glenn Schultz, a mortgage-bond analyst at Wells Fargo & Co. in Charlotte, North Carolina, wrote in a Dec. 2 report. “However, we believe that government support is likely needed through” the first half of next year “before the recovery will be self- sustaining.”
 
While lowering financing costs for home buyers, the recent decline in mortgage rates failed to spark the same level of refinancing of existing loans as seen earlier this year after most “highly qualified borrowers” already cut their costs, Credit Suisse Group analysts including Mahesh Swaminathan in New York wrote in a report yesterday.
 
Refinancings Decline
 
The Mortgage Bankers Association’s seasonally adjusted index of refinancing applications in the latest week was down 61 percent from a high this year in January.
 
“What you’re always going to find is mortgage companies are going to be quick to respond to negative news for the bond market and they will raise rates rapidly,” Findlay said.
 
The difference between yields on the Fannie Mae bonds and 10-year government notes tightened today by about 0.01 percentage point to 0.77 percentage point, Bloomberg data show. On Nov. 24, the spread was at 0.68 percentage point, the smallest since 1992.
 

Email Jody Shenn at jshenn@bloomberg.net
Copyright 2009 Bloomberg L.P.
This article appeared at http://www.bloomberg.com

Print  
Licensed by the California Bureau of Real Estate
License number 00685309
NMLS number 338105
Equal Housing Lender
Licensed by the California Bureau of Real Estate
License number 00685309
NMLS number 338105
Equal Housing Lender