While many here in Winter Haven, Florida were “underwhelmed” with Treasury Secretary Tim Geithner’s latest press conference, it was what he did not say Tuesday that pushed mortgage markets into more favorable waters.
What we saw just after Geithner’s speech was an example of “safe-haven” buying.
What is Safe Haven Buying and Why Does it Impact the Mortgage Market?
Safe-haven buying is when investors seek refuge from riskier investments by moving cash into vehicles they consider less risky.
This existence of the pattern is evident in looking the Dow Jones Index timeline just after the text of Geithner’s speech was released.
Stock markets were down some in the morning. Then, at 11:00 AM ET, in the moments immediately following the public release of Geither’s speech as text, stock market ramped downward by 2 percent.
As the speech was delivered live, markets fell by 1 percent more.
Geithner’s speech wasn’t bad in and of itself. It just lacked the level of detail many on Wall Street felt it required given the magnitude of what we’re facing on the financial markets front – specifically dealing with the banking, housing, and economic markets.
Instead, what Secretary Geithner delivered was more of an outline of his plan with some stern language about the complex nature of our nation’s present financial situation.
Stock markets had been bid up last week in anticipation of a bailout. Yesterday’s action was the subsequent sell-off because economic uncertainty continues to linger.
It all ended up being good news for mortgage rate shoppers, though. This is because when investors move their money from “risky stocks” to “safer bonds” (namely, mortgage-backed bonds in this case), demand for these bonds rises and rates fall.
Personally, that dip allowed me to lock a few of my Winter Haven and Orlando, Florida clients in at very favorable rates, keep their fees low (always a priorty), and make a little bit of money on my end as well.
You have to love win-win situations!
- Geithner plan disappoints investors (telegraph.co.uk)
- Markets show little support for Geithner bailout plan (cbc.ca)
- Geithner Pledges Vigorous Economic Battle (time.com)
- Tim Geithner unveils new plan to rescue US banking system (telegraph.co.uk)
- Geithner bank plan short on detail (msnbc.msn.com)
(Image courtesy: The Wall Street Journal)
I hope you found this post useful! As always, if you or anyone you know is in need of a local Florida mortgage broker, I’m your guy. Call me at 863-604-3019 or apply online for your Florida mortgage. We’ll keep you posted and let you know when it’s time to pull the trigger!
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