In a remarkable time for the financial world, the latest state of the markets shows trade uncertainty. As specialists in mortgage-backed securities, MBSQuoteline wants its clientele to understand the many elements in play.
State of the Markets Reflects Trade Tensions
Investors face a lot of significant questions on a wide range of issues right now. The latest state of the markets reflects little surprise amongst increased uncertainty. Generally, investors reducing the level of risk in their portfolios. As usual, they accomplished this primarily by shifting their assets from stocks to bonds, including mortgage-backed securities.
Meanwhile, U.S.-China trade tensions present the largest concern for investors. Tariffs and other barriers to trade slow global economic activity. Thus, the trade tensions reduce the outlook for future inflation and reflect favorably for mortgage rates.
Manufacturing Strife & Geopolitical News
Additionally, the state of the markets shows questions regarding global economic growth. Around the world, the manufacturing sector clearly took a hit from the trade issues. Additionally, business investment fell as companies hesitate to make long-term capital commitments. On the other hand, U.S. consumer spending remained quite healthy in recent months. Alibaba (“the Amazon of China”) just released strong earnings results.
In addition, several geopolitical events around the world present concerns. Massive protests took place in Hong Kong, Japan, and North Korea as they face their own trade dispute. Meanwhile, Argentina faces serious economic deterioration. Finally, Iran remains a potential source of trouble.
Looking Ahead After State of the Markets
After the state of the markets, it is worth noting that mortgage rates did not drop nearly as quickly as long-term Treasury yields. This is not uncommon during periods of rapid declines in bond yields due to the prepayment risk inherent in mortgage-backed securities.
If refinancing occurs, the holder of mortgage-backed securities no longer receives the expected future interest payments, making the security less valuable. In this sense, lenders display mixed feelings about rapidly falling yields and mortgage rates may drop by a smaller amount than usual.
After the state of the markets, mortgage rates didn’t see a rapid decline, but it’s still early. Never miss an update with MBSQuoteline. To receive by-the-minute updates on mortgage-backed securities, try our platform free for 14 days.
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