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Week in Review: Mortgage Rates and Treasury 10s Decline (Colombia and South Korea Fall More)
Confounded Interest ^ | 07/12/2013 | Anthony B. Sanders

Posted on 07/12/2013 6:02:48 PM PDT by whitedog57

As we close out the week, the US Treasury 10 year yield fell 5.4 basis points, similar to the decline in the Japanese 10 year sovereign yield of 6.0 basis points. The UK, Germany, Sweden, Australia and New Zealand all saw around 15 basis point drops in their 10 year sovereign yields. Colombia and South Korea saw over 20 basis point yield declines.

wbm071213

According to the Bankrate 30 year mortgage survey, mortgage rates and the US Treasury 10 both fell after a dramatic rise since the May Day Massacre (international sovereign yield rise).

ust10br30071213

In the agency MBS market, Fannie Mae 3.5% MBS rose above par (100) after dipping below par earlier.

fn35pr071213

The duration of the Fannie 3.5% has increased since April 12th.

fn35dur071213

And Fannie 3.5% convexity is approaching zero (but became more convex over the past week).

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If interest rates rise 100 basis points, we might see prepayment speeds (CPR) drop to 5.5.

prepayvec071213

Finally, here is the current interest rate volatility surface.

futcube071213

While Philadelphia Fed President Charles Plosser thinks that the Fed stimulus should be tapered by the end of the year, but others disagree.

Stay tuned!


TOPICS: Business/Economy; Government; Politics
KEYWORDS: colombia; fed; mortgage; sovereign
This is getting crazy!
1 posted on 07/12/2013 6:02:48 PM PDT by whitedog57
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To: whitedog57
The Fed is trying to keep interest rates down, but they mat not be able to. Almost everything in the economy today is planned based upon low or falling interest rates since their peak in 1982. The reason why house prices have appreciated so much is not due to the quality of houses, but to falling interest rates, which allows people to buy more expensive houses with the same monthly payment.

But interest rates can't stay down forever, and when they rise, everything we "knew" will be wrong. We must prepare for an economy with rising interest rates, because what was a good strategy since 1982 will be the exact wrong strategy for the next 30 years.

2 posted on 07/12/2013 6:39:41 PM PDT by Vince Ferrer
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To: whitedog57

I’m waiting for zero mortgage rates!


3 posted on 07/12/2013 7:32:09 PM PDT by dynachrome (Vertrou in God en die Mauser)
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