How Swine Flu Helps Mortgage Rates

Swine Flu may be good for mortgage ratesMonday, mortgage markets improved with news of new Swine Flu cases

It’s a classic example of Safe Haven buying and today’s rate shoppers will see the benefits.

Mortgage rates improved about 0.125 percent Monday.

It’s not an official term, but “Safe Haven buying” describes the trading patterns in which large numbers of investors move money away from risky investments and toward safer ones.  As a general rule in Safe Haven buying, stocks sell off and bonds make gains, including mortgage-backed bonds.

Fears that a global Swine Flu outbreak would slow the global recovery is a major reason why mortgage rates improved Monday.

Dumping risk is a common reaction on Wall Street when unexpected events occur.  Because the future is uncertain, traders prefer to play it safe.  Hence the jargon-like term, “Safe Haven buying”.

If nothing else, Monday’s mortgage rate action reminds us that the biggest influences on the market are often not the events we can prepare for.  It’s the events we never saw coming.

This morning, with known Swine Flu cases spreading to Asia and a Phase 4 Alert from the World Health Organization, Safe Haven buying is continuing.  However, with the Federal Reserve meeting today and tomorrow, markets could be ripe for a correction. 

(Image courtesy: Niman and Google Maps)