March 24, 2010
March 24, 2010 by admin
The bond market saw a flurry of activity on Wednesday as yield on treasury bonds jumped to their highest levels in March. Moving up nearly ten basis points, Treasury yields saw their largest spike up in the past four months, a signal that interest rates on home mortgages are also likely to be heading higher in the near future. Thirty year mortgage rates have moved up above five percent and have been drifting around this level for the better part of the past sixty days as the yield on the ten year Treasury bond has been around 3.7% for most of this time. Today’s upward spike in Bonds comes at a surprising time as the stock market actually lost ground in trading and the two most recent reports on the housing market (existing and new home sales) both showed signs of weakness in the real estate industry. The housing market certainly can not afford for a rise in mortgage rates as all signals are indicating that the market is going to struggle to grow at last years pace, despite tax incentives for existing and first time home buyers that were extended into 2010.
The passing of the Health Care reform bill is going to be interesting to watch for its political fallout as well as impact on health insurance and rates companies are charging both corporations and individuals. The highly controversial program has been a topic of political conversation for over a year and likely will be a major factor in the elections of 2012.
Bank of America announced today a new program that seems to be the first realistic step towards ending the foreclosure epidemic in the U.S., the company will be offering principal balance reductions on home mortgages as a way to help avoid an escalation of home foreclosures. The company announced they would be targeting up to 45,000 customers and offering a reduction in the principal loan balance of up to 30% for these customers. The logic is that the bank will financially be in a better position by writing down the loans versus attempting to sell the distressed properties in a foreclosure. The news should be a major jolt to the lending marketplace and force other lenders to follow suit as a way to help bring home mortgage loans and the real estate market back from the abyss.
Student loans were another hot topic in the financial markets today. The government announced they would be eliminating the financial middlemen from the markets in a move to help save upwards of sixty billions dollars over the next ten years, which will be used to help pay for additional scholarships and grants. The decision for the government to lend directly was hotly debated and could create further political tensions.