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Jason Obradovich - Chief Investment Officer

Housing Market Update Center

Translating the complexity of the markets into a concise and easy to digest format. Watch videos, read blogs, and view key data on short and medium term trends impacting interest rates, so you can make the right decision for your situation.

Latest Market Update

Maintaining Liquidity When Everything Shuts Down

No doubt by now you’ve heard of the major disruptions in the financial markets in the past two weeks with the FOMC lowering interest rates to near zero, stock prices falling by 25% and long-term Treasury rates moving below 1%. 

With the Fed Funds overnight rate near zero percent, there has been a lot of confusion around the level of mortgage rates.  So what’s happening with mortgage rates?

The last couple of weeks have seen an unprecedented amount of volatility with respect to mortgage rates.  One day mortgage rates are in the low 3’s and a few days later in the upper 4’s, and now here we are back in the mid-3’s.   If you didn’t know, the key driver of mortgage rates is mortgage-backed-securities.  unfortunately, the huge stock market selloff and concerns over a deep recession have spilled over into all financial markets, including mortgage-backed-securities.

In a normal market, mortgage rates move in tandem with Treasury rates but due to there being a lot more sellers of mortgage-backed-securities vs buyers, mortgage rates were actually going up even though treasury rates were going down. 

This month we have seen huge swings in the spread between mortgages and Treasuries.  The chart below shows the spread between mortgage-backed-securities and treasury yields for 2020.  Note how much the spreads have increased and then reverse the other direction multiple times.  These are unprecedented swings over such a short period of time and what’s causing a lot of confusion around the current level of mortgage rates.

Thankfully the Fed stepped up this week to purchase up to $50 billion a day in mortgage-backed-securities to help stabilize the market and has made a pledge to use any and all means necessary to keep the market functioning regularly.   That doesn’t necessarily mean mortgage rates will continue to drop nor does it solve all of the issues facing mortgage-backed-securities today, but it does provide a backstop of support.

In the coming weeks, you should expect continued volatility in the market as the challenges faced by the whole world and financial markets due to the coronavirus continues to unfold.

Previous Market Update


Welcome back to the Mortgage Rundown.  Today we are going to talk about what’s happening in the capital markets and interest rates around the world. 

No doubt by now you’ve seen the volatility in both the stock and bond markets.  Treasury and mortgage rates saw all-time lows and stock price volatility hit all-time highs.

Take for example the 30 year Treasury bond, which for all practical purposes is the best gauge of the long term outlook for the US economy.   Longer term outlooks generally don’t change as frequently or with as much volatility as shorter-term outlooks.  However in the past week the 30yr Treasury bond has experienced the greatest amount of volatility in its entire history, going all the back to when it was first issued in 1970. 


Volatility in Treasury bonds centered around the threat of a recession-related to the coronavirus has created more single day interest volatility than the Great Recession, the terrorist attacks on September 11th, Black Monday of 1987 and other major events in history. 

In fact March 9th of this week is now known as Black Monday 2020, with the stock market halting after 4 minutes of trading, the Dow Jones Average dropping over 2,000 points on the day, the 10yr falling below 0.5% and gold rising over $1,700 an ounce.

This has created havoc all over the market and the fallout from all of these recent events has been a rapid drop in mortgage rates.  This rapid drop, unfortunately, creates a lot of issues with mortgage-backed-securities trading all over the map.  Irrational pricing occurs which ultimately can get very confusing for loan officers and borrowers.  These types of dislocations occur for a few months before realigning to a different market as expectations sync up with reality.

Expect continued volatility over the next several weeks as information and the impact of the coronavirus works its way through the news and the trading levels of bonds and stocks.  After the market calms down, hopefully, the dislocations in the mortgage-backed-securities market will normalize and as lenders clear out their pipelines, mortgage rates will align closer with Treasury rates.

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