You might remember that I previously discussed the significance of geopolitics as an influencer of mortgage rates.
Global investment capital, always in some state of flux between asset classes, tends to swarm into safety assets when the geopolitical concerns bubble up like this. Bond investments, especially those based in US Dollars, often benefit from these mood swings.
This includes Mortgage Bonds and US Treasuries. When these instruments receive surges of investment, their value increases, borrowing rates go lower. This is what we are seeing presently, with the recent flare-up in Libya causing bond markets to lurch higher yesterday after the long weekend of events.
What’s a little tougher to decipher is the contrast the Libya events have had to the Egypt timeline. Mortgage rates were on a two week run higher until about a week and a half ago. This was in the face of the events as they were unfolding in Egypt. It seemed that during that span, there were too many domestic economic reports showing indications of improving conditions with the economy. Things that provide signals on inflation, consumer confidence, unemployment, and GDP also have a big influence on the bond markets, and on mortgage rates. Sometimes, bigger than a revolution.
But there was no “good” yesterday today to overcome the gravity of geopolitical events that built up over the long weekend. Rates started out lower than the previous day, and charged that direction with confidence all day.
The mood changes as the global events unfold. And this is the living and breathing, dynamic nature of markets.