September economic data sends mortgage rates higher
September 17, 2009 by admin
The mortgage industry is beginning to feel the pinch of rates moving higher as the economy continues to gain confidence as new data shows further strength in the recovery and better days ahead. The month of September, is typically a challenging month for the equity markets. This year, the market is not playing by the same rules, economic reports have reassured investors that the worst is likely over, and the market is now well positioned to eclipse the 10,000 point level on the DOW. The strong rally from investors in equity positions has carried over to the bond market. Yields on the ten year treasury have risen over ten basis points in the past two weeks, and indications that mortgage rates could continue moving higher are beginning to surface. Last week, the mortgage bankers association reported a decline in mortgage applications of almost nine percent as momentum in the home refinance market is carrying through.
The connection between equities and bonds has been significantly altered in trading this year. Historically, upward movement in the stock market carries over to the bond market, rising up required yields and interest rates along the way. This paradigm has been greatly reduced this year as bonds yields have held near record lows, despite the upward movement in the stock market. The month of September, may be one of the last remaining months that bonds benefit from this unusual trend. The stock markets approach to the 10,000 point level could carry significant changes in the mindset of investors. As equity investors regain confidence and begin to place sideline funds back into equities, a further rally could start to take additional funds off the table for bonds, forcing yields to move higher.
This month, the market has been reassured by testimony from Ben Bernanke and recently Warren Buffett as to the state of the economy and the further likelihood that the recession will be coming to and end over the next coming quarters. Despite the lack of job growth, there are a number of economic reports that have been released this month that help to indicate brighter days in the near future. The housing market is continuing to show signs of improvement, including the release of the housing starts report, which topped expectations for multi family home building. The housing market has been one of the key beneficiaries from the low bond yields and historically low mortgage rates this year. The market also reacted favorably to a report from the Philadelphia Fed Factory Index, This key economic reports, and monitors factory production on a monthly basis in and around the Philadelphia region. Last month, productions surged by 10 points, and are now at its highest level since the fall of 2007. These better than expected economic reports are being a catalyst behind another rally in the stock markets. There are many experts who believe that the job market is one of the lagging indicators in an economic recovery, and the stabilization of other key data are some of the most important factors that will point to the ending of a recession. Time will tell, if this philosophy holds true for the current recession, credited as being the worst economic recession since the great depression. The silver lining, is confidence appears to be slowly growing, and is one of the main components of the economy, which could help speed up the process.