Realist Real Estate Roundup: Government re-opens and bonds rally

Market Realist

Realist Real Estate Roundup, October 14–18 (Part 1 of 7)

Why follow the weekly Realist Real Estate Roundup?

The roundup is a weekly series in which we discuss the week’s trading in government bonds and TBA (To-Be-Announced) mortgage-backed securities. We’ll see where mortgage rates have been and we’ll go over the weekly economic data and earnings announcements. Then we’ll look forward to what’s coming up the following week. The information in this series will be relevant to mortgage REITs like American Capital Agency (AGNC), Annaly (NLY), Hatteras (HTS), Capstead (CMO), and MFA Financial (MFA) as well as people who invest in homebuilders.

Bonds rally after we get a deal on the shutdown

The three-week shutdown officially ended last week, as Congress came to an agreement to fund the government through mid-January and raise the debt ceiling through early February. As part of the agreement, it will try to find a way to get the budget closer to balance. Obama did relent on one part of Obamacare—an anti-fraud measure that requires the government to verify income before handing out subsidies.

After we got a deal, the market began to focus on the monetary policy implications of the shutdown. The consensus seems to be that we won’t get a change in policy this year, and March 2014 seems to be when we’ll begin tapering. Bonds rallied 9 basis points and closed the week at 2.58%.

In the next parts of this series, we’ll look at trading in the TBA market (which is the basis for mortgage rates), see where mortgage rates have been for the week, and then discuss past and upcoming economic data.

Continue to Part 2

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