Macroeconomic News and Mortgage Rates

Posted: 19 Jun 2003

See all articles by Sanjay Ramchander

Sanjay Ramchander

Colorado State University, Fort Collins - Department of Finance & Real Estate

Marc William Simpson

The John B. and Lillian E. Neff Department of Finance, University of Toledo

James R. Webb

Cleveland State University

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 signficantly 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.

Keywords: Macroeconomic Announcements, Mortgage Rates, Mortgage Spreads

Suggested Citation

Ramchander, Sanjay and Simpson, Marc W. and Webb, James R., Macroeconomic News and Mortgage Rates. Available at SSRN: https://ssrn.com/abstract=410281

Sanjay Ramchander (Contact Author)

Colorado State University, Fort Collins - Department of Finance & Real Estate ( email )

Fort Collins, CO 80523
United States
970-491-6681 (Phone)

Marc W. Simpson

The John B. and Lillian E. Neff Department of Finance, University of Toledo ( email )

Toledo, OH 43606
United States

James R. Webb

Cleveland State University ( email )

1860 E. 18th St., BU 327E
Cleveland, OH 44115
United States
216-687-4716 (Phone)
216-687-4716 (Fax)

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