Many have asked if there has every been a period of time when prices in the mortgage market have fallen more dramatically than they have during the 443+ basis point plunge recorded from May 21st through the market close on Friday, June 5th.
You may find it surprising to know that as recently as the two week period between 10/11/08 and 10/18/08 the Fannie Mae 4.5% 30-year mortgage-backed security plummeted over 500 basis points. The following two weeks it rallied 400 basis points -- before again slumping 350 basis points during the week of 11/1/08. Following the low set on 11/1/08 -- the Fannie Mae 4.5% 30-year mortgage-backed security rallied for more than 1000 basis points over the next seven weeks ended 12/20/08.
The real rarity in terms of price history here is there has only been one nine-week period (dating back to at least 2000) where the trading range (measured from high to low) of mortgage-backed security prices has been limited to 100 basis points or less -- and that one magical time period occurred between the week ended March 28, 2009 and the week ended May 23, 2009.
The "so what" factor here is that current price action in the mortgage market is, believe it or not, actually more the norm -- than the exception. I am certainly not suggesting any of us have to like the recent volatility - I am just respectfully suggesting we take just a moment to put the recent price swoon into its proper perspective -- as one of the ordinary dynamics of our business.
This week's $65 billion, three-part Treasury auction posses a significant threat to the prospects for steady to fractionally lower mortgage interest rates. I think it will be an exercise in futility to look for much, if anything in the way of rate sheet price improvements before the final gavel falls at 1:00 p.m. ET on Thursday at the conclusion of Uncle Sam's 30-year bond offering.
No comments:
Post a Comment