Posted on in Consumer Education
Mortgage markets are like any other market — in order for goods to change hands, a buyer and a seller must first reach an agreement to “trade” at a specific price point. In general, the more buyers and sellers there are for a particular item, the easier it is to find that “fair value” and make the deal. An abundant number of buyers and sellers often creates a liquid market in which assets — in this case, mortgage bonds — can be sold rapidly with minimal loss. This week, though — with so many traders on vacation — the “liquid market” has gone illiquid. The treasury market posted just 41 percent of its normal, daily volume Monday, leading to erratic pricing in the mortgage bond market which, in turn, caused mortgage rates to follow. For example, mortgage rates started the day lower yesterday before sprinting higher over a 30-minute, early-afternoon span. Markets were largely unprovoked by economic data, geopolitical developments, […]
by jberman