The BIG "D" - Deflation!!

Mortgages in Greenville, NC - Yesterday, the Federal Reserve indicated that our economy is showing signs of deflation. This means that the average price of goods may be going down instead of up. The market has reacted by moving money from the stock market into the bond market. Generally, this would be a good thing for mortgage rates, causing them to drop. However, if you follow mortgage rates, you've seen that we haven't seen a significant change in rates. The reason is that investors still don't have a high level of confidence in mortgage bonds. The charts below show the 10 year T-Bill rates as well as the FNMA bond prices over the past 3 months. The first chart shows how T-Bill rates have significantly dropped over the past week. The 2nd chart shows the price of the FNMA 6% 30 year bonds. (Bond prices move inversely to the rates) As you can see, the FNMA Bond has stayed fairly flat. Hopefully, as investors gain confidence in mortgage bonds, more people will buy them causing rates to drop.