Nashville Mortgage Rates Update- 10/26/11

Nashville Mortgage Rates

Treasuries and mortgage backed securities were under pressure today after the big move yesterday.  Yesterday, stock indexes took a hit while the 10 year note yield fell 11 basis points;  today, the 10 year rate was up 9 bps and mortgage prices after rallying 66 bps yesterday, were down today 50 bps (worse mortgage rate pricing).  About 1:30 this afternoon, news hit that China has indicated it may be willing to invest in Europe’s financial crisis.  The on again-off again over Europe continues while the US 10 year note driver for mortgages holds within a 12 basis point range for the last 2 weeks.  European leaders convened for the 2nd summit in 4 days- and the 14th in 21 months.  The Chinese comment will take a lot of pressure away from fears that a bank will fail in Europe and drag the US financial system into the contagion.

There isn’t any specifics out of the summit yet,  while the swing in optimism has swung from yesterday and today markets believe there is major progress being made.  If China does buy some of the junk debt (at huge discounts), that will relieve some of the concerns that have held US markets hostage for way too long.  As Yogi said- “it isn’t over until it’s over”, so expect som more rustling in the next few days or months.  In any case, as long as US investors don’t fear contagion into our financial system, maybe the US can pull away from tying everything to Europe.

This morning’s increase in September new home sales isn’t a huge trend change, but it has added to the view the economy is improving.  Durables for September were also a plus with ex-transportation orders (aircraft) increasing 1.7%, three times stronger than expected.  This afternoon’s $35 billion 5 year note auction went well.  When the auction results were reported at 1 EST, treasuries briefly got a bounce, but it didn’t last as the China news pre-empted.

Tomorrow we should have more info from the summit meeting in Europe.  News of China’s interest investing helped the sentiment this afternoon, but so far there isn’t any details from the meeting.

The tight ranges define the bond and Nashville mortgage markets.  As long as the 10 year doesn’t crack 2.27% (go above), the range should continue; the wider look remains bearish and won’t turn around until the 10 year falls below 2.05% at closing.  If Europe has a solution, even if it isn’t the end-all, it will remove safety trades into US treausuries.  The economic outlook for the moment is improving, and as long as the equity markets believe it, the treasry markets (and mortgage markets) have a big hurdle.  Two drivers for lower rates may be nearing an end.

Advice: Lock any loans that are closing within the next 2 weeks, but carefully float any rates beyond that, and lock on any rallies (stock market pullbacks).  I will keep you posted with more Nashville Mortgage Rates Updates as we wade through this volatility.