Boing! Bonds Bounce Back Beautifully.

Thanks Dan.  I guess after teaching Beowulf to 17 year-olds for 12 years, you get pretty good at making material relevant.  The basis points are basically fractions of percentage points above or below PAR.  If I buy a bond at PAR, I am paying 100% of it's value.  For discussion's sake, let's say I buy a FNMA 6% bond for $100.  I spend $100 and get paid the interest while I hold that bond.

If the market for bonds is hot, then FNMA may price their bond at 100.25, so as an investor, I am paying a little more for my $100 bond.  .25 more, or 25 basis points more.  100 basis points = 1%.  If stocks are hot and bonds are tanking, I may pay 99.75 for a $100 bond.

Pretty simplistic overview, but what it means for the consumer is that if we are down in basis points, the lenders make that up in raising their rates.  If we are up basis points, rates go lower.  Again, a pretty basic summary, but hopefully it covers your question.

Thanks for the update on my localism.com ranking.  I have plenty more questions for you on embedding other people's blog posts among other things, but I'll save them for when you get back.  Have a good one!