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After the most major meltdown in U.S. stock trading since September 17, 2001, markets appear to be recovering this morning.

This should reverse the drop in mortgage rates we saw towards the end of the day yesterday.

To understand why mortgage rates go down when stock markets suddenly fall, we must look at the investor’s perspective. [...]

The Flight-to-Quality continues in the bond markets.

Iran said today that the suspension of its uranium enrichment program “will never happen”, fueling speculation that an international stand-off is pending. The United States has sent additional aircraft carriers to the Gulf in response.

Normally, this action is enough to frighten markets into bonds by itself, [...]

Aside from CPI, last week was quiet on the economic data front. Traders used the week to catch their breath and look around a bit at market conditions. They liked what they saw and strong demand for bonds pushed mortgage rates down.

This week, the big Market Mover Day is Thursday, coinciding with the [...]

In defiance of the UN Security Council, Iran is taking another step towards successfully building a nuclear weapon.

Yesterday, it was reported by the International Atomic Energy Agency that Iran expanded its ability to create nuclear weapons and that it plans to “turn on” at least 1,000 uranium-enrichment centrifuges.

Internationally, this decision creates questions (and [...]

A little known fact about yesterday’s CPI numbers: they weren’t as inflationary as you would have otherwise thought. It all comes down to decimals and rounding.

What The Expectations Were

CPI: 0.1% increase in January
Core CPI: 0.2% increase in January

What The Headlines Reported

CPI: 0.2% increase in January
Core CPI: 0.3% increase in January

What The Actual Figures Were

CPI: [...]

Markets did not like today’s Consumer Price Index figures which came in higher than expected. However, the downbeat mood this morning is not enough to reverse the recent downward trend in mortgage rates.

The chart at right shows CPI over the past two years and the band collars the Fed’s articulated “comfort zone” for inflation.

The [...]

Fed Chairman Ben Bernanke carried the biggest stick in the mortgage rate market last week. His “Goldilocks” testimony before the Senate Banking Committee spoke of favorable growth and subsiding inflation.

Markets expected a harsher tone from Bearded Ben and that is why rates dropped post-testimony — the expectation diminished that the Fed will [...]

Interest rates are currently inverted, a market situation in which the longer you commit to lending your money, the less your return on investment. It’s counter-intuitive so let’s delve a little deeper.

Imagine if a friend asked you to borrow money for two years and you charged him interest on that money. There are [...]

The markets continue to show their appreciation for Fed Chairman Bernanke’s testimony yesterday and mortgage rates are falling in response.

So, why do the Chairman’s words hold such sway over global markets? Simple. Buying and selling U.S. dollar-denominated securities is an integral part of central banking fiscal management policies worldwide. When the Chairman [...]

Addressing the Senate Banking Committee this morning, Fed Chairman Ben Bernanke gave the speech that most people expected: The current monetary policy (read: Fed Funds Rate) is at a level that both sustains economic growth, and tempers inflation pressures.

In addition, inflation expectations "appear to have remain contained," Bernanke said. He [...]