Mr.Mortgage predicts two bottoms…

[carlsbadworker]

[quote=Bob]The problem for the Fed, and they are openly discussing it now, is that in order to avoid continued deflation, they have created inflation, and potentially hyper inflation. Later this summer Bernanke will have to make a very important decision…which is to say, he will have to decide whether or not to pull back on future Fed investment in US treasuries. If he decides to pull out, you will see the stock market drop, and at the same time, you will see mortgage rates spike.[/quote]

I think the biggest risk of the bond market is not that the Fed will pull out of US treasury. They can always buy again when the mortgage rate spikes. The biggest risk of the bond market is that Asia economy (particularly Chinese economy) will recover before the US does (as many economists are predicting that right now). Once the Chinese economy is in firmer footing, they will want to manage the dollar risks. So no matter how much Fed wants to buy in the US treasuries market, the Chinese government has at least 10 times that amount that they want to sell. Fed’s buying will create a perfect opportunity for them to unload their non-performing treasury asset at a much higher price to diversify into other currencies and assets. That’s the dilemma that will soon face Ben: to buy or not to buy.

[sdrealtor]

[quote=sdduuuude][quote=Bob][quote=sdduuuude]
You gotta lotta nerve, there Bob, or should I call you “member for 3 weeks Bob” ?[/quote]

Flattery will get you nowhere.
[/quote]

Don’t worry – I’ll only call you that for another 4 days.[/quote]

I love it when we are all having fun with each other around….Funny stuff going on

[sdrealtor]

[quote=sdduuuude][quote=Bob][quote=sdduuuude]
You gotta lotta nerve, there Bob, or should I call you “member for 3 weeks Bob” ?[/quote]

Flattery will get you nowhere.
[/quote]

Don’t worry – I’ll only call you that for another 4 days.[/quote]

I love it when we are all having fun with each other around….Funny stuff going on

[sdrealtor]

[quote=sdduuuude][quote=Bob][quote=sdduuuude]
You gotta lotta nerve, there Bob, or should I call you “member for 3 weeks Bob” ?[/quote]

Flattery will get you nowhere.
[/quote]

Don’t worry – I’ll only call you that for another 4 days.[/quote]

I love it when we are all having fun with each other around….Funny stuff going on

[sdrealtor]

[quote=sdduuuude][quote=Bob][quote=sdduuuude]
You gotta lotta nerve, there Bob, or should I call you “member for 3 weeks Bob” ?[/quote]

Flattery will get you nowhere.
[/quote]

Don’t worry – I’ll only call you that for another 4 days.[/quote]

I love it when we are all having fun with each other around….Funny stuff going on

[sdrealtor]

[quote=sdduuuude][quote=Bob][quote=sdduuuude]
You gotta lotta nerve, there Bob, or should I call you “member for 3 weeks Bob” ?[/quote]

Flattery will get you nowhere.
[/quote]

Don’t worry – I’ll only call you that for another 4 days.[/quote]

I love it when we are all having fun with each other around….Funny stuff going on

[temeculaguy]

Former, that was EPIC, if the bottom of the market, the top of the market, the middle, the recession and the depression look like that, sign me up! Not sure I can handle a double, I probably wouldn’t survive a weekend, but I’ll give the old college try.

[temeculaguy]

Former, that was EPIC, if the bottom of the market, the top of the market, the middle, the recession and the depression look like that, sign me up! Not sure I can handle a double, I probably wouldn’t survive a weekend, but I’ll give the old college try.

[temeculaguy]

Former, that was EPIC, if the bottom of the market, the top of the market, the middle, the recession and the depression look like that, sign me up! Not sure I can handle a double, I probably wouldn’t survive a weekend, but I’ll give the old college try.

[temeculaguy]

Former, that was EPIC, if the bottom of the market, the top of the market, the middle, the recession and the depression look like that, sign me up! Not sure I can handle a double, I probably wouldn’t survive a weekend, but I’ll give the old college try.

[temeculaguy]

Former, that was EPIC, if the bottom of the market, the top of the market, the middle, the recession and the depression look like that, sign me up! Not sure I can handle a double, I probably wouldn’t survive a weekend, but I’ll give the old college try.

[Bob]

[quote=5yearwaiter]Bob, How mortgage rates spike happens if Bernanke pull out the Fed feeding to treasuries?. I know I am not up to your level of guess interms of bond market etc – so this question.[/quote]

Thats a good question, so let me try to explain it as best I can.

Yields on 10-year and 30-year Treasury securities are typically used to set long-term mortgage rates. Loans with short initial terms (1-, 3-, and 5- year ARMs are used for shorter-term securities.) So when bond yields drop, typically, conventional mortgage rates fall as well. But, when yields rise, so do mortgage rates. Why? If a lender chooses to sell your mortgage loan to an investor, the lender will likely use Treasury yields as a benchmark for value.

As for Bernanke, when he made the decision to purchase securities, he did so with the goal of reducing bond yields, with the clear intention of lowering mortgage rates. This policy was implemented with the hopes of kickstarting the economy and the real estate market out of its deflationary cycle. But the only way to sustain such low rates will be for the Fed to continue purchasing securities. At some point this summer, Bernanke will have to make an important decision on whether or not to continue this policy. If he continues the policy, that will be a clear indication that the economy hasn’t yet turned the corner…but it will also be a red flag for future inflation.

[Bob]

[quote=5yearwaiter]Bob, How mortgage rates spike happens if Bernanke pull out the Fed feeding to treasuries?. I know I am not up to your level of guess interms of bond market etc – so this question.[/quote]

Thats a good question, so let me try to explain it as best I can.

Yields on 10-year and 30-year Treasury securities are typically used to set long-term mortgage rates. Loans with short initial terms (1-, 3-, and 5- year ARMs are used for shorter-term securities.) So when bond yields drop, typically, conventional mortgage rates fall as well. But, when yields rise, so do mortgage rates. Why? If a lender chooses to sell your mortgage loan to an investor, the lender will likely use Treasury yields as a benchmark for value.

As for Bernanke, when he made the decision to purchase securities, he did so with the goal of reducing bond yields, with the clear intention of lowering mortgage rates. This policy was implemented with the hopes of kickstarting the economy and the real estate market out of its deflationary cycle. But the only way to sustain such low rates will be for the Fed to continue purchasing securities. At some point this summer, Bernanke will have to make an important decision on whether or not to continue this policy. If he continues the policy, that will be a clear indication that the economy hasn’t yet turned the corner…but it will also be a red flag for future inflation.

[Bob]

[quote=5yearwaiter]Bob, How mortgage rates spike happens if Bernanke pull out the Fed feeding to treasuries?. I know I am not up to your level of guess interms of bond market etc – so this question.[/quote]

Thats a good question, so let me try to explain it as best I can.

Yields on 10-year and 30-year Treasury securities are typically used to set long-term mortgage rates. Loans with short initial terms (1-, 3-, and 5- year ARMs are used for shorter-term securities.) So when bond yields drop, typically, conventional mortgage rates fall as well. But, when yields rise, so do mortgage rates. Why? If a lender chooses to sell your mortgage loan to an investor, the lender will likely use Treasury yields as a benchmark for value.

As for Bernanke, when he made the decision to purchase securities, he did so with the goal of reducing bond yields, with the clear intention of lowering mortgage rates. This policy was implemented with the hopes of kickstarting the economy and the real estate market out of its deflationary cycle. But the only way to sustain such low rates will be for the Fed to continue purchasing securities. At some point this summer, Bernanke will have to make an important decision on whether or not to continue this policy. If he continues the policy, that will be a clear indication that the economy hasn’t yet turned the corner…but it will also be a red flag for future inflation.

[Bob]

[quote=5yearwaiter]Bob, How mortgage rates spike happens if Bernanke pull out the Fed feeding to treasuries?. I know I am not up to your level of guess interms of bond market etc – so this question.[/quote]

Thats a good question, so let me try to explain it as best I can.

Yields on 10-year and 30-year Treasury securities are typically used to set long-term mortgage rates. Loans with short initial terms (1-, 3-, and 5- year ARMs are used for shorter-term securities.) So when bond yields drop, typically, conventional mortgage rates fall as well. But, when yields rise, so do mortgage rates. Why? If a lender chooses to sell your mortgage loan to an investor, the lender will likely use Treasury yields as a benchmark for value.

As for Bernanke, when he made the decision to purchase securities, he did so with the goal of reducing bond yields, with the clear intention of lowering mortgage rates. This policy was implemented with the hopes of kickstarting the economy and the real estate market out of its deflationary cycle. But the only way to sustain such low rates will be for the Fed to continue purchasing securities. At some point this summer, Bernanke will have to make an important decision on whether or not to continue this policy. If he continues the policy, that will be a clear indication that the economy hasn’t yet turned the corner…but it will also be a red flag for future inflation.

[Author]

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