Macroeconomic News and Mortgage Rates |
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Authors: | Sanjay Ramchander Marc W. Simpson James R. Webb |
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Affiliation: | (1) Department of Finance and Real Estate, College of Business, Colorado State University, Fort Collins, CO 80523, USA;(2) Department of Economics and Finance, University of Texas—Pan American, Edinburg, TX 78539, USA;(3) Department of Finance, James J. Nance College of Business, Cleveland State University, 1860 E. 18th Street, Cleveland, OH 44114, USA |
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Abstract: | The study analyzes the influence of macroeconomic news announcements on (a) interest rates for commercial mortgages, residential mortgages, 10-year Treasury notes, and Baa-rated corporate bonds; and (b) corresponding mortgage spreads. It is both interesting and highly relevant from a policy and portfolio management standpoint to examine the implications of the influence of macroeconomic news announcements on mortgage markets. Some important results are reported. First, consistent with the notion of market integration, mortgage rates are found to be co-integrated with other capital market instruments. Second, of the 22 types of periodic macroeconomic news releases considered, 13 of them have a significant influence on at least one of the interest rates, and notably changes in hourly earnings and housing starts significantly influence all debt-security yields. More generally, macroeconomic news that conveys higher inflation and/or economic growth has a positive influence on mortgage and other interest rates. Finally, this study finds several announcements including durable goods orders, new home sales, personal consumption, non-farm payroll, trade balance and Treasury budget to have a significant influence on mortgage spreads. |
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Keywords: | mortgage market macroeconomic news mortgage spreads |
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