Thread: Mortgage Broker
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Old 09-26-2008, 10:56 AM   #28
Mike Oxlong
Got Oliver Klozoff
 
Join Date: Feb 2003
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From the article: (They seem to be able to explain it better than I can)

"The changes suggest bond markets are worried about the future inflationary pressures from the proposed US$700 billion U.S. government bailout of Wall Street banks, said TD Bank chief economist Don Drummond.
"We always did figure that adding $700 billion to the deficit of the United States would probably cause something like a 25 basis point (quarter point) increase in the longer-term interest rates and that seems to have already happened," said Drummond.
"(The bailout) does increase the risk to bonds. In just plain good old demand and supply that means there has to be an awful lot of bond issuance and there's a limited supply of people that want to buy them so it's natural that the price goes up," he added.
The interest rates on mortgages and other short-term borrowing are set based on the price of bonds. With lower demand for bonds and fears of inflation, rates have to rise to lure investors willing to part with their money.
Other interest rates in the economy - from consumer and car loans to mortgage rates tied to the prime rate - are affected by the Bank of Canada trend-setting rate, which is expected to fall or remain stable over the next few months at least.
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