In defiance of the UN Security Council, Iran is taking another step towards successfully building a nuclear weapon.
Yesterday, it was reported by the International Atomic Energy Agency that Iran expanded its ability to create nuclear weapons and that it plans to “turn on” at least 1,000 uranium-enrichment centrifuges.
Internationally, this decision creates questions (and fears) about Iran and its nuclear ambition. Traders respond to this by moving their money from risky economies to strong economies. Strong economies better protect and preserve investment dollars when global politics get “scary”.
A related strategy is when investors sell small cap stocks in favor of DJIA stocks during a market swoon. The jargon for this buying and selling approach is “Safe Haven” buying.
For mortgage rates, this is a good thing. The United States economy is considered a Safe Haven and investors tend to snap up dollar-denominated securities in the presence of political uncertainty.
More buyers of mortgage-backed securities means that the prices go up. And, as is always the case with bonds, higher prices mean lower yields/rates.