{"id":14866,"date":"2011-07-29T13:21:24","date_gmt":"2011-07-29T20:21:24","guid":{"rendered":"http:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/?p=14866"},"modified":"2011-07-29T13:21:24","modified_gmt":"2011-07-29T20:21:24","slug":"could-mortgage-rates-drop-after-a-treasuries-credit-ratings-downgrade","status":"publish","type":"post","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/14866\/could-mortgage-rates-drop-after-a-treasuries-credit-ratings-downgrade\/","title":{"rendered":"Could Mortgage Rates DROP after a Treasuries’ credit ratings downgrade?"},"content":{"rendered":"

The dictated debt limit deadline looms and a credit rating downgrade, to US Treasury securities and agency mortgage-backed securities, seems likely.\u00a0 Naturally, a spike in treasury yields is expected and a subsequent rise in mortgage rates should follow. \u00a0 That’s right out of the senior year textbook<\/a>, in most American business schools.<\/p>\n

I’m not so sure the fixed-income markets will follow the textbook.\u00a0 Mortgage rates might … do nothing<\/em> in response the the credit rating downgrade.\u00a0 Here’s why:<\/p>\n

The credit ratings agencies lack……well…credibility.<\/strong><\/p>\n

The independent credit ratings agencies ( Moodys, Standard & Poors, Fitch, etc) have a reputation for being late on the scene.\u00a0 They got hoodwinked with Enron, MCI\/Worldcom, and Greece.\u00a0 They were asleep at the wheel during the mortgage meltdown, issuing AAA ratings to CDOs, up until late 2007.\u00a0 They are often considered to be too chummy with the issuers (the issuers pay their fee) and when the issuer is a government (with the power to regulate their business), they generally walk on eggshells.<\/p>\n

The news may be baked into the market already.<\/strong><\/p>\n

The ratings agencies have been signaling a potential downgrade for months.\u00a0 Clearly, raising the US debt limit will allow the Treasury to remain “liquid” but the agencies have said a downgrade is likely unless a substantive plan is enacted to reduce spending.\u00a0 Cut, Cap & Balance<\/a>, the “most extreme” of the proposals offered, still might not have been “extreme” enough to avoid a downgrade.\u00a0 Both political parties are demonstrating that they lack the political will to address the long-term structural deficits, needed to bolster the Federal budget, to avoid the ratings downgrade.\u00a0 Fixed income traders seem to be shrugging that off.<\/p>\n

US Treasury securities are still considered to be the safest investment in the world.<\/strong><\/p>\n

Certainly there are better run countries than the US but their debt offerings lack SIZE; there ain’t enough of that debt for the real money.\u00a0 Germany has its EU obligations hanging around in the background and Japan seems to be in worse shape than we are.\u00a0 Chinese sovereign debt could be a consideration but the Chinese and Japanese still want their investments dollar-denominated.\u00a0 The US is, for all Read more<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The dictated debt limit deadline looms and a credit rating downgrade, to US Treasury securities and agency mortgage-backed securities, seems likely.\u00a0 Naturally, a spike in treasury yields is expected and a subsequent rise in mortgage rates should follow. \u00a0 That’s right out of the senior year textbook, in most American business schools. I’m not so […]<\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_crdt_document":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[251,8,26],"tags":[],"class_list":{"0":"post-14866","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"hentry","6":"category-big-mother","7":"category-investment","8":"category-lending","10":"no-featured-image"},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":4477,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/4477\/alex-ill-take-irony-for-600\/","url_meta":{"origin":14866,"position":0},"title":"Alex, I’ll Take “Irony” for $600","author":"Sean Purcell","date":"September 17, 2008","format":false,"excerpt":"The government is now in the mortgage business and the insurance business.\u00a0 I am sure others will expound on the AIG debacle and all of its implications in due course.\u00a0 I just wanted to point out the something that should make me laugh so hard it brings a tear to\u2026","rel":"","context":"In "Investment"","block_context":{"text":"Investment","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/investment\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":6769,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/6769\/the-fed-translated-4\/","url_meta":{"origin":14866,"position":1},"title":"The Fed Translated…..","author":"Tom Vanderwell","date":"January 30, 2009","format":false,"excerpt":"Tom here\u2026.\u00a0 Sorry for the delay, but better late than never\u2026.. (my comments are in bold) The Federal Open Market Committee decided today to keep its target range for the federal funds rate at 0 to 1\/4 percent. Nothing new there and no surprises.\u00a0 Can\u2019t go lower than zero and\u2026","rel":"","context":"In "General"","block_context":{"text":"General","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/general\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":5913,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/5913\/treasury-may-lower-mortgage-rates\/","url_meta":{"origin":14866,"position":2},"title":"Treasury\u00a0may lower mortgage rates?","author":"Tom Vanderwell","date":"December 3, 2008","format":false,"excerpt":"WASHINGTON (MarketWatch) - The Treasury Department is contemplating a proposal that would cut mortgage rates for new loans for homes, according to the Wall Street Journal. The plan would employ Fannie Mae to offer mortgages with rates as low as 4.5%, roughly 1% lower than current rates. The measure is\u2026","rel":"","context":"In "Lending"","block_context":{"text":"Lending","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/lending\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":2663,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/2663\/once-more-with-feeling-mortgage-rates-are-determined-by-mortgage-bonds-mbs-not-the-ten-year-t-note\/","url_meta":{"origin":14866,"position":3},"title":"Once More With Feeling- Mortgage Rates Are Determined by Mortgage Bonds (MBS), Not The Ten Year T-Note","author":"Brian Brady","date":"February 26, 2008","format":false,"excerpt":"Mortgage rates are volatile today...very volatile.\u00a0 There are two underlying factors contributing to the volatility: suspicion of the credit quality of the MBS market and supply\/demand imbalance (more people want money than is offered). Why am I so adamant about the fact that the ten-year treasury note is not the\u2026","rel":"","context":"In "Lending"","block_context":{"text":"Lending","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/lending\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":2796,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/2796\/will-the-fed-buy-mortgage-backed-securities-in-the-open-market\/","url_meta":{"origin":14866,"position":4},"title":"Will the Fed Buy Mortgage Backed Securities In the Open Market?","author":"Brian Brady","date":"March 18, 2008","format":false,"excerpt":"I never post my Mortgage Rates Reports here.\u00a0 They're boring unless you are thinking about buying a home or refinancing your mortgage.\u00a0 Today, it seems plausible that the Fed is shifting its open market activities from buying treasuries, to buying mortgage-backed securities, in order to bolster liquidity in the mortgage\u2026","rel":"","context":"In "Lending"","block_context":{"text":"Lending","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/lending\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":1667,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1667\/the-800-pound-gorilla-in-the-corner-the-meltdown-of-the-wall-street-mortgage-market\/","url_meta":{"origin":14866,"position":5},"title":"The 800 pound gorilla in the corner – the meltdown of the Wall Street mortgage market","author":"Morgan Brown","date":"July 16, 2007","format":false,"excerpt":"As we go about our daily lives in the mortgage and real estate world; dutifully performing our job functions and taking the high road of customer enlightenment via blogs such as Bloodhound; we are faced with a very large gorilla looming in the corner of our workplace. That gorilla is\u2026","rel":"","context":"In "Lending"","block_context":{"text":"Lending","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/lending\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/14866","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/comments?post=14866"}],"version-history":[{"count":1,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/14866\/revisions"}],"predecessor-version":[{"id":14867,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/14866\/revisions\/14867"}],"wp:attachment":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/media?parent=14866"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/categories?post=14866"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/tags?post=14866"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}