If you were in the market to buy new Bonds; then last week was your week. Over $35 Billion in new Bond were offered by the US Treasury. The auctions were well received throughout the week. It is my opinion that how well this auction is received because it a gauge for investor appetite. With dull buying means that buyers feel that rates will be higher down the road. But as I mentioned, last week's offering was well received by both US and foreign investors, which means that they feel that the rate market will remain somewhat stable ahead. Bond buyers who seek a safe, high rate of return on their money love our US Bonds - and their continued investment in our Bond market has helped keep Bond prices high, and therefore, home loan interest rates low. Based on the good result of the auctions, Bond prices and home loan rates improved throughout the week, but then lost some ground on Friday to end the week right back where they started.
So what happened? First, it is what I call technicals......traders saw prices as topping out, and decided to sell and take their profits. Additionally, there were several Fed officials on tour, including St. Louis Fed President William Poole. Poole mentioned increased defaults in home loans to risky borrowers, and said that rates may rise as a result. A Fed official simply whispering "rising home loan rates" was enough to spook Traders on Friday.
Everyone please remember that this week cupid will be on the prowl. The week has a host of potentially market-moving reports...and at the heart of it will be Retail Sales coming out on Valentines Day. Isn't that special!!! This report may come in a little stronger than normal due to all of the gift card purchases made during the holiday season. You see, Retailers do not count gift cards as sales - until they are redeemed. So since gift cards were such a hot holiday item this year, many recipients may have gone on spending sprees in January, thereby leading to a potentially hot Retail Sales number this week, which would pressure home loan rates higher.
After a couple of weeks of improvement, Bond prices hit a tough ceiling and have retreated lower. Unless there is some Bond-friendly economic news in store, Bond prices will likely follow this trend, causing people looking for a Raleigh mortgage to see thier rates to worsen slightly this week.
As always, your feedback and thoughts are welcome.