A Good Summer for Short-Term Bonds
Last week the yield on the 10-year Treasury bond spiked above 5% and bond prices slumped even further. For this reason it is a good idea to invest in short-term bond funds now. On the other hand, you should wait for a while before locking in your mortgage.
Currently, yields are falling and bond prices are rising. This is actually a very good thing. However, if you purchase a bond and simply collect your interest until the bond matures, you will be envious of people who hold bonds with higher yields.
On the other hand, mutual funds calculate the value of their bonds daily. So, when bond prices fall, so will your fund’s share price. This will be based upon the market’s erosion but the same thing will happen when things are on the rise.
By the end of the summer many people who are in the mortgage market expect that yields will fall. This is because higher interest rates will only serve to slow the economy. For this reason, waiting until the end of the summer to lock in a mortgage rate will allow you to get lower interest rates. Therefore it will pay off for those who can wait a while to make their appointment with a mortgage lender at a later date.