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In The Summer, Mortgage Rates Can Change More Swiftly Than Usual

June 20, 2007 by Scott Kinne

Light trading can lead to mortgage rate volatility

It was another favorable day for mortgage rates yesterday as average housing data and momentum trading carried bond prices higher.

Bond prices up, mortgage rates down, of course.

All things considered, mortgage bonds should not have moved as much as they did. But, this is the summer season and in the summer, fewer traders show up for work.

Especially during a week like this one in which there is no major data release.

With fewer traders participating, there are fewer bond buyers to match with sellers, and fewer bond sellers to match with buyers.

Therefore, it is much less likely that a person who wants to buy at a certain price will find somebody who wants to sell at a certain price. Therefore, mortgage bonds (and interest rates) tend to move a lot more sharply during the summer than we’re otherwise used to seeing.

Today, three Fed presidents take the stump: Janet Yellen (San Francisco), Timothy Geithner (New York), and Richard Fisher (Dallas). Markets will listen to the Fed speaker for clues inflation and the economy.

If the speakers indicate worry over inflation, mortgage rates will rise in response.

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Scott Kinne

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Vice President, Senior Loan Officer
NMLS ID #182351
Office: 703.293.6146
Mobile: 571.237.6241
Fax: 571.317.2478
skinne@fhmtg.com

Licensed In Maryland, Virginia, Washington D.C., West Virginia
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