Monday, December 5, 2011

Fannie, Freddie, and the FHA will keep the fire hose of liquidity flowing through 2012, with rates we may never see again - AHF Online Article

How low can it go?

That was the question on everybody’s mind throughout 2011, as the limbo stick of interest rates plunged to new lows and borrowers happily danced in droves.
There was never a better time to lock in some long-term debt than 2011. The yield on the benchmark 10-year Treasury just kept dropping and bottomed out at an all-time low of 1.72 percent Sept. 22, hovering between there and 2.3 percent through the beginning of November.

Yet, for every step forward there was another step back. While the benchmark dropped, investor spreads on agency debt rose as the fragile economy stumbled through the summer, highlighted by Standard & Poor’s downgrade of America’s credit rating, which included Fannie Mae, Freddie Mac, and Ginnie Mae.

That stark contrast between low U.S. bond yields and equally low U.S. economic prospects will continue to be the central tension throughout 2012. Interest rates will continue to stay low, and the agencies will keep liquidity flowing—but those tailwinds could meet with headwinds.

Read more...AHF Online Article - Fannie, Freddie, and the FHA will keep the fire hose of liquidity flowing through 2012, with rates we may never see again

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