Mortgage rates¬†moved moderately lower¬†today, as financial markets positioned themselves for an important announcement from the European Central Bank (ECB) tomorrow regarding the possibility of tapering its asset purchases. ¬†Much like the market movement seen in late 2013 following the Fed's "tapering" message, stocks and bonds (yields) moved in opposite directions (i.e. stock prices higher and bond yields/rates lower). ¬†This occurs because central bank purchases are like a rising tide that lifts all ships. ¬†The more a major central bank is spending, the better things generally are for both stocks and bonds. ¬†This runs counter to the typical intraday stock/bond relationship where yields/rates tend to move in the same direction as stock prices.
So why did we see a move ostensibly inspired by central bank policy before the actual announcement? ¬†To oversimplify, traders have been betting on the ECB tapering. ¬†This makes stocks lower and rates higher than they otherwise would be. ¬†But traders don't want to have open positions heading into the day of the announcement. ¬†In other words, they moved back to the sidelines, which in this case, has the effect of pushing stock prices higher and rates lower....(read more)Forward this article via email:¬†¬†Send a copy of this story to someone you know that may want to read it.[img]http://www.mortgagenewsdaily.com/aggbug.aspx?PostID=686323