Mortgage rates look set to fall below 5% following the continuing rally in the mortgage-backed securities market, which was given a new boost today by the Federal Reserve. The central bank announced earlier Monday that it was purchasing mortgage-backed securities for its own account.
The New York Fed indicated on its Web site last week that its purchases of mortgage-backed securities "will be financed by the creation of additional bank reserves," which is to say that the purchases will not be offset by any actions that drain money from the banking system.
Currently, 30-year mortgage-backed securities are trading very well compared to Treasuries, with yields falling about 13 basis points. That's enough to bring the 30-year fixed-rate mortgage below 5%, given that the average rate for 30-year fixed-rate mortgages was 5.1% last week, according to Freddie Mac's (FRE - commentary - Cramer's Take) weekly mortgage survey.
Last week's rate was the lowest since record-keeping began in 1972. The average rate paid on 30-year fixed-rate mortgages was 6.1% over the past five years.
P.S. Will you be there when Cramer makes his next move?
Strong brands and companies with vast market exposure can help bolster your portfolio. Jim was able to lock in a 64% gain by buying Ingersoll-Rand at $13 and selling at $22.50. Action Alerts PLUS members were the first to see these moves. Were you among them? Get Free Access Today!
Tony Crescenzi Blog Long-Dated Treasury Yields Up Again 1/5/2009 9:41 AM EST However, short-dated Treasuries are seeing only small increases.
Tony Crescenzi Blog Turn on the Water Works 1/2/2009 2:51 PM EST The water industry will see strong growth.
Tony Crescenzi Blog Rig Count Sits at Three-Year Low 1/2/2009 1:38 PM EST The data from Baker Hughes confirm a general production slowdown.
Tony Crescenzi is the chief bond market strategist at Miller Tabak + Co., LLC, and advises many of the nation's top institutional investors on issues related to the bond market, the economy and other macro-related issues. At the request of the Federal Reserve, Crescenzi is a regular participant in the board's Livingston Survey of economic forecasters. He is also the author of the revised investment classic, The Money Market,
first published in 1978 by Marcia Stigum, and The Strategic Bond Investor. At the time of publication, Crescenzi or Miller Tabak had no positions in the securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Crescenzi also is the founder of Bondtalk.com, a popular Web site covering the bond market and the economy. Crescenzi appreciates your feedback; click here to send him an email.
TheStreet.com has a revenue-sharing relationship with Trader's Library under which it receives a portion of the revenue from purchases by customers directed there from TheStreet.com.
RSS FEEDS
PODCASTS
