Friday, July 07, 2006

Mortgage rates down! reports that for the first time in a month, "The benchmark 30-year fixed-rate mortgage fell 2 basis points to 6.91 percent...One year ago, the mortgage index was 5.7 percent. Four weeks ago, it was 6.69 percent."

Why? gives us this explanation:
"Long-term mortgage rates tend to move up and down in the same direction as yields on 10-year Treasury notes because, from an investor's standpoint, they have similar time horizons. After the Federal Reserve's June 29 rate increase, yields on 10-year Treasuries fell the next couple of workdays.

"Why in the world did Treasury yields fall after a Fed rate hike? Investors read the Fed's explanation and interpreted it to mean that the central bank believes that inflation is under control. Low inflation bestows low long-term bond yields. Some investors read the statement wishfully and concluded that the Fed was hinting that it won't raise rates at its next meeting, in August. That helped to push down long-term rates, too."

To read more: July 6, 2006 interest rate report

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