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Eugene.
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January 31, 2008 at 11:07 AM #11680January 31, 2008 at 11:22 AM #146097
Eugene
ParticipantIt’s all very complicated and there are many contradicting ways to look at things. Mortgage rate and long-term bond behavior can perplex even the most experienced investors. (Google “Greenspan’s conundrum”) Short answer is, no one knows which way mortgage rates will go.
January 31, 2008 at 11:22 AM #146440Eugene
ParticipantIt’s all very complicated and there are many contradicting ways to look at things. Mortgage rate and long-term bond behavior can perplex even the most experienced investors. (Google “Greenspan’s conundrum”) Short answer is, no one knows which way mortgage rates will go.
January 31, 2008 at 11:22 AM #146380Eugene
ParticipantIt’s all very complicated and there are many contradicting ways to look at things. Mortgage rate and long-term bond behavior can perplex even the most experienced investors. (Google “Greenspan’s conundrum”) Short answer is, no one knows which way mortgage rates will go.
January 31, 2008 at 11:22 AM #146368Eugene
ParticipantIt’s all very complicated and there are many contradicting ways to look at things. Mortgage rate and long-term bond behavior can perplex even the most experienced investors. (Google “Greenspan’s conundrum”) Short answer is, no one knows which way mortgage rates will go.
January 31, 2008 at 11:22 AM #146341Eugene
ParticipantIt’s all very complicated and there are many contradicting ways to look at things. Mortgage rate and long-term bond behavior can perplex even the most experienced investors. (Google “Greenspan’s conundrum”) Short answer is, no one knows which way mortgage rates will go.
January 31, 2008 at 12:11 PM #146346kicksavedave
ParticipantI am certainly not a bond or mortgage expert, but I have been researching the same issues you ask in your original post. Here’s what I’ve learned.
Over the short term, many different things effect mortgage rates, and I’ve observed with each recent Fed short term rate cut, a temporary spike in 30 year fixed mortgage rates. So for a brief period, you can see mortgage rates move opposite of the short term, or Fed rates.
But I recently did a spreadhseet tracking the 30 year fixed average vs the Fed Funds rate since 1990, and found they track very closely over a long term. The short term Fed rates move very steadily, with changes only every quarter or six months, while mortgages had more volatility, changing daily and weekly. This past week is an example of that volatility, where morgages jumped big time after the Fed cut its rates by a total of 1.25%.
But over a long term, when the Fed lowers its rates, mortgages eventually fall as well.
January 31, 2008 at 12:11 PM #146373kicksavedave
ParticipantI am certainly not a bond or mortgage expert, but I have been researching the same issues you ask in your original post. Here’s what I’ve learned.
Over the short term, many different things effect mortgage rates, and I’ve observed with each recent Fed short term rate cut, a temporary spike in 30 year fixed mortgage rates. So for a brief period, you can see mortgage rates move opposite of the short term, or Fed rates.
But I recently did a spreadhseet tracking the 30 year fixed average vs the Fed Funds rate since 1990, and found they track very closely over a long term. The short term Fed rates move very steadily, with changes only every quarter or six months, while mortgages had more volatility, changing daily and weekly. This past week is an example of that volatility, where morgages jumped big time after the Fed cut its rates by a total of 1.25%.
But over a long term, when the Fed lowers its rates, mortgages eventually fall as well.
January 31, 2008 at 12:11 PM #146384kicksavedave
ParticipantI am certainly not a bond or mortgage expert, but I have been researching the same issues you ask in your original post. Here’s what I’ve learned.
Over the short term, many different things effect mortgage rates, and I’ve observed with each recent Fed short term rate cut, a temporary spike in 30 year fixed mortgage rates. So for a brief period, you can see mortgage rates move opposite of the short term, or Fed rates.
But I recently did a spreadhseet tracking the 30 year fixed average vs the Fed Funds rate since 1990, and found they track very closely over a long term. The short term Fed rates move very steadily, with changes only every quarter or six months, while mortgages had more volatility, changing daily and weekly. This past week is an example of that volatility, where morgages jumped big time after the Fed cut its rates by a total of 1.25%.
But over a long term, when the Fed lowers its rates, mortgages eventually fall as well.
January 31, 2008 at 12:11 PM #146102kicksavedave
ParticipantI am certainly not a bond or mortgage expert, but I have been researching the same issues you ask in your original post. Here’s what I’ve learned.
Over the short term, many different things effect mortgage rates, and I’ve observed with each recent Fed short term rate cut, a temporary spike in 30 year fixed mortgage rates. So for a brief period, you can see mortgage rates move opposite of the short term, or Fed rates.
But I recently did a spreadhseet tracking the 30 year fixed average vs the Fed Funds rate since 1990, and found they track very closely over a long term. The short term Fed rates move very steadily, with changes only every quarter or six months, while mortgages had more volatility, changing daily and weekly. This past week is an example of that volatility, where morgages jumped big time after the Fed cut its rates by a total of 1.25%.
But over a long term, when the Fed lowers its rates, mortgages eventually fall as well.
January 31, 2008 at 12:11 PM #146445kicksavedave
ParticipantI am certainly not a bond or mortgage expert, but I have been researching the same issues you ask in your original post. Here’s what I’ve learned.
Over the short term, many different things effect mortgage rates, and I’ve observed with each recent Fed short term rate cut, a temporary spike in 30 year fixed mortgage rates. So for a brief period, you can see mortgage rates move opposite of the short term, or Fed rates.
But I recently did a spreadhseet tracking the 30 year fixed average vs the Fed Funds rate since 1990, and found they track very closely over a long term. The short term Fed rates move very steadily, with changes only every quarter or six months, while mortgages had more volatility, changing daily and weekly. This past week is an example of that volatility, where morgages jumped big time after the Fed cut its rates by a total of 1.25%.
But over a long term, when the Fed lowers its rates, mortgages eventually fall as well.
January 31, 2008 at 1:25 PM #146356michael
ParticipantThe reason long term rates sometimes move in opposite direction of the short term fed funds rate is inflation expectations. When the fed lowers short term rates, demand (in theory) should increase, and thus avoiding (in theory) a recession (and weakening the dollar). However, increase in demand is inflationary (in theory). The longer dated bond market anticipates the future inflation and begins selling longer dated bonds thus increasing yields.
Some are calling the entire yield curve a bubble and when real inflation (CPI or GDP deflator or your own… man everything is expensive) kicks in you’ll see the selling in mass and interest rates shooting through the roof.
Also, when it comes to mortgage rates, their is a spread over the treasury rates that also varies according to current perceived credit risk, etc.
There are many takes including those from the deflation camp and it is very difficult to try to predict interest rates.
January 31, 2008 at 1:25 PM #146112michael
ParticipantThe reason long term rates sometimes move in opposite direction of the short term fed funds rate is inflation expectations. When the fed lowers short term rates, demand (in theory) should increase, and thus avoiding (in theory) a recession (and weakening the dollar). However, increase in demand is inflationary (in theory). The longer dated bond market anticipates the future inflation and begins selling longer dated bonds thus increasing yields.
Some are calling the entire yield curve a bubble and when real inflation (CPI or GDP deflator or your own… man everything is expensive) kicks in you’ll see the selling in mass and interest rates shooting through the roof.
Also, when it comes to mortgage rates, their is a spread over the treasury rates that also varies according to current perceived credit risk, etc.
There are many takes including those from the deflation camp and it is very difficult to try to predict interest rates.
January 31, 2008 at 1:25 PM #146383michael
ParticipantThe reason long term rates sometimes move in opposite direction of the short term fed funds rate is inflation expectations. When the fed lowers short term rates, demand (in theory) should increase, and thus avoiding (in theory) a recession (and weakening the dollar). However, increase in demand is inflationary (in theory). The longer dated bond market anticipates the future inflation and begins selling longer dated bonds thus increasing yields.
Some are calling the entire yield curve a bubble and when real inflation (CPI or GDP deflator or your own… man everything is expensive) kicks in you’ll see the selling in mass and interest rates shooting through the roof.
Also, when it comes to mortgage rates, their is a spread over the treasury rates that also varies according to current perceived credit risk, etc.
There are many takes including those from the deflation camp and it is very difficult to try to predict interest rates.
January 31, 2008 at 1:25 PM #146394michael
ParticipantThe reason long term rates sometimes move in opposite direction of the short term fed funds rate is inflation expectations. When the fed lowers short term rates, demand (in theory) should increase, and thus avoiding (in theory) a recession (and weakening the dollar). However, increase in demand is inflationary (in theory). The longer dated bond market anticipates the future inflation and begins selling longer dated bonds thus increasing yields.
Some are calling the entire yield curve a bubble and when real inflation (CPI or GDP deflator or your own… man everything is expensive) kicks in you’ll see the selling in mass and interest rates shooting through the roof.
Also, when it comes to mortgage rates, their is a spread over the treasury rates that also varies according to current perceived credit risk, etc.
There are many takes including those from the deflation camp and it is very difficult to try to predict interest rates.
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