"WISH ME LUCK!" Last words spoken by Niagara Falls barrel rider...But luck hasn't been on the side of home loan rates, as Mortgage Bonds tipped over the edge on Thursday, adding to the brutal cascade lower which began on May 8th, and causing home loan rates to move significantly higher along the way. Last week the damage was particularly dramatic, as Thursday brought the largest single-day worsening in Bonds and home loan rates seen in three years. Although Friday brought a small amount of recovery, home loan rates still increased by .25% across the board overall.
So what happened last week? There was a sell-off in Mortgage Bonds on the news of Central Bank rate hikes in other countries, as these hikes make other global investments more attractive than our US Bonds for those seeking higher yields. The reduced demand for Mortgage Bonds causes prices to fall and home loan rates to rise. But it was not the news of other Central Banks hiking rates that caused the extreme reaction - this event was simply the proverbial "straw that broke the camels back", as Bonds were primed for a move lower after blowing through another technical "floor of support". Keep reading to learn how important these floors of support are to home loan rates...
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