Mortgage Rates Show Support in Face of Adverse Market

It is no mystery, when the stock market does well, bond markets have a tendency to sell off, which leads to higher interest rates. With this basic understanding logic would suggest the bond markets would be selling off strongly in the wake of large gains in the stock market today. As fate would have it, currently we are seeing a small sell off, but nothing anyone could define as substantial. In fact, there appears to be support in the mortgage backed securities market at this time, with it only trading down 10 ticks on the day. Of course we have a few hours left to trade and the sell off could continue, the point is at this time we would expect to see larger losses in secondary based on the gains in the stock market.

Why the support? It would seem that European woes are leading people to our bond markets. Despite the downgrade US debt and mortgage backed securities is still the safe harbor play. With other harbors facing choppy water, we're the best play in town. At this point in time, it is clear mortgage rates will stay low moving into the future. Yes we've seen a small sell off today, but the sentiment is strong and resounding... long term markets currently offer the safety and return investors are looking for. Until the stock market settles and the VIX comes down, we're to be able to enjoy this low rate environment.