Nashville Mortgage Rates Update- 11/17/11

Nashville Mortgage Rates

The 10 year note finally broke below 2.00% to 1.95% at 2 PM CST this afternoon, while safe haven trades have kept the 10 year note from increasing, it took a break in the stock market to finally push the yield down. Also, the 2 year note swap rate is exploding- it started yesterday and gathered momentum today. As the swap goes higher, the implication is that investors are increasingly nervous over whether counter-parties can meet the terms of the swaps as Europe continues top sprial downward. In Europe there wasn’t much again today. This morning, the 10 year yield hit 2.05% as Italian yields dipped a little. This afternoon on concern Europe’s leaders are failing to contain the regions’ debt crisis as borrowing costs jumped at Spanish and French bond sales; the U.S. 10 year note saw more buying. The 10 year note now is a six week low in yield.

Weekly claims and the November Philly Fed business index was better than expected this morning and put a little selling in treasuries and mortgage bonds. The stock market this morning traded and little better until about noon EST when a comment out of Europe not to expect any big bailouts coming anytime soon for countries that are seriously constrained by excessive debt.

Equity markets also being hit by news on the Super Committee that it is at an impasse. The Committee is supposed to have a plan to cut spending by $1.2 trillion by November 23rd, five days from today. In a sense it isn’t surprising that politicians can’t agree on a plan, they haven’t agreed on anything for the last year.

Europe is dragging the global economy closer to decline everyday with the inability to do anything other than changing governments in Italy and Greece with the idea the countries will actually come up with spending cuts and revenue increases so their debts might be restructured. So far, Greece hasn’t made any progress and in Italy, they’re already squabbling over the new prime minister Monti’s appointments to his cabinet. According to reports, the European Central Bank bought more Italian government bonds, following purchases earlier today. Yields on 10-year Italian government debt fell 17 basis points to 6.84% after climbing 15 basis points earlier to 7.15%.

The 10 year note cut below 2.00% today, a good thing for mortgage rates but will it stick?  The note has done this a few times recently only to see no follow-through the following day or two. Although the main driver is Europe, it will depend on how the U.S. equity market performs. Key indexes were down yesterday (Down -190) and down again today 134 points after a low today of -229. There is little reason to expect rates to rise given the circumstances, but whether long term U.S. mortgage rates will fall much more remains a question. That said, the move today does strengthen the technical picture that has essentially been neutral for the last two weeks. 

Despite the 10 year note yield’s recent drop, mortgage backed securities haven’t moved much at all over the past week, which has kept mortgage rates from improving.  Check back next week for more market data that affects Nashville mortgage rates.  Have a great weekend.