Nashville Mortgage Rates

It has been another quiet day, the same as yesterday except the 10 year note yield fell to 1.85%, a new recent low.  Mortgage markets, however, not much change.  The stock market tried to rally but pared gains, wiping out a 99 point rally in the Dow, as optimism over the debt crisis fizzled after Fitch Ratings said it may downgrade ratings of European nations, citing Europe’s failure to find a comprehensive solution to the debt crisis.  It also said all investment-grade countries in the euro region rated below AAA are subject to a “Rating Watch Negative” review, which Fitch expects to complete by the end of January.

Europe is imploding and likely cannot avoid defaults of sovereign debt.  Talk is all we get from the region because talk is all it has now.  Normally sovereign debt is held by investors that seek safety and a guaranteed rate of return; no matter what Europe’s various officials do, there isn’t much chance that investors that normally buy most of the debt will come back.  That leaves the question, who will buy it once it is pared down and with likely guarantees from the EU, ECB or the IMF?  It  has taken over a year for pundits to come to that question, now that it is out there, the answer is not what most expected a year ago.

The bond market is pushing into new low yields as money continues to seek safe places.  So far the equity markets have taken the improvement in recent U.S. economic data as a sign that all is well.  After the first of the year, banks in Europe will begin to fail, debt ratings  will continue to fall, and likely the prospect of a deep recession in Europe will drag stock indexes down.  If we are correct in that assumption, U.S. bond and mortgage rates will remain very low;  The wild card likely to be played at some point next year will be an attempt to sweeten the incentive to buy that debt using guarantees and big hair cuts.  The normal buyers of sovereign debt won’t likely bite but if the pot is sweet enough hedge funds could be attracted as well as traders and investors will to increase risk for a high rate of return and in turn make U.S. rate markets higher.

Next week is the real beginning of the end-of-year holidays with Hanukkah beginning on Tuesday, and markets will close early on Friday and be closed the following Monday for Christmas.  The investment community will be closing down for the year, and volume will continue to decline as the week progresses.

Hope you have a great weekend and check back next week for another super-exciting installment of Nashville Mortgage Rates Updates!

Nashville Mortgage Rates

Treasuries and mortgage bonds rallied hard this afternoon.  At 1 PM EST, the $21 billion 10 year treasury note auction blew the doors off with very strong demand, and at 2:15, the FOMC statement added more thrust.  Over the last 3 months, Treasury borrowing has met with very strong demand, likely much of it due to the ongoing financial problems in Europe.

Some FOMC excerpts:   “the economy has been expanding modestly…strains in global financial markets continue to pose significant downside risks to the economic outlook… the Committee also anticipates that inflation will settle over coming quarters…business investment increasing less rapidly…housing sector remains depressed…unemploymnet rate will decline only gradually”.

On the FOMC statement the stock indexes declined and went negative on the day.  Overall, the statement is about what was anticipated based on recent economic reports.  Between the FOMC and the rock-solid 10 year note auction, it was the demand for the 10 year note the drove most of the rally.  With no progress from the EU last week, pushing the can farther down the road with no willingness to act aggressively, money continues to roll out of Europe and into the “safe arms” of the U.S.   Then there was disappointment that the Fed didn’t talk Quantitative Easing number 3 (QE#) as some were expecting;  we were not in that camp, but according to comments and the reaction in equities, there must have been more than a few who were. 

Not much on the board for tomorrow, just the $13 billion 30 year bond auction that is very likely to be another strong auction.   We are currently below 2.00% on the 10 year yield, and if recent history dictates, we won’t stay there long, so it wouldn’t be a bad time to lock your interest rates in before treasury yields pop back over the important 2.00% threshold.  We will keep you posted with another Nashville Mortgage Rates Update very soon…

Nashville Mortgage Rates

Not much to report today-the mortgage bond market as well as treasury market continues to trade in its well defined range, although MBSs held better than treasuries as the safety trades caused by the mess in Europe continue to be lifted on the belief there will be a short term answer on the debt issues when the EU summit begins Thursday and into Friday. That said no one should believe for a minute Europe will be out of its crisis, but for now a lot of the angst has diminished, at least until Friday.

It’s still a very fluid situation with little ability to properly anticipate what will happen next, but in the end, the EU will most likely be restructured with some countries leaving, and Germany holding the key to many of the issues facing an experiment that began in 1999 and now is unraveling in a sea of debt so large that it won’t be under control for a year or more- if then. Th EU as we have known it is about to change radically, but it will take a lot of time.

There was no data today to think about; tomorrow the only things of consequence is at 3 EST when October credit data is reported. Present thinking is credit expanded by $7.0 billion, a very small increase. We pay all attention to revolving credit as a measurement of consumers willing to take on debt; for a couple of years now, revolving credit has declined as consumers reduce debt.

We’ll have another Nashville Mortgage Rates Update on Thursday or Friday, after more is know regarding the EU decisions (or lack thereof).

Nashville Mortgage Rates

The stock market had a good day on news that weekend sales topped $52 billion, much stronger than expected;  most retail analysts were expecting this holiday season to be weaker than last year.  Based on the weekend buying, markets rallied hard, however at the end of the day we still have to go through a month of holiday buying, which leaves the question hanging out there:  did the weekend get more sales and the rest of the month be slow?  No evidence today though- online retail sales today were up a whopping 20% from a year earlier as of noon EST today, as shoppers flocked to the web for deals on so-called Cyber Monday, according to IBM.

Treasuries and mortgage backed securities (MBS) were weak this morning on the 300+ move higher in the Dow but by this afternoon, treasuries and mortgages improved nicely from morning levels, while stock indexes did their usual thing in the final hour– backing away from early levels.  Most all lenders improved mortgage rate pricing from original levels set this morning.

Financial ministers are to meet later this week in Europe in another attempt to find a way to keep the EU intact and avoid massive defaults that are increasingly more worrisome.  Last week, Germany, the best economy in Europe, couldn’t sell bonds at its auctions (total demand wasn’t enough to sell all the bills and notes the government auctioned- extremely unusual).  Nevertheless, there is some additional optimism as the week begins that the finance ministers will accomplish something—as it is said, hope springs eternal.

Selling of treasuries and MBSs Friday and this morning sent the 10 year note to 2.08% from 1.88% at last Wednesday’s close.  This afternoon, even with stock indexes strong, the 10 year rallied back to 1.95% before moving to 1.97% at 4 PM EST.  Mortgage backed securities turned with the 10 year not and rallied with most lenders improving prices from morning levels.  The rebound today kept the slightly bullish technicals intact (for treasuries and MBS).  Another reminder- we continue to be skeptical that the 10 year note can sustain a rate under 2.00% for any length of time.  The technical picture at the moment remains generally positive, but if optimism increases that Europe may dodge defaults (for now anyway), treasuries and mortgage bonds will not take it well.

Please check back later in the week for another Nashville Mortgage Rates Update post.  For archives of previous posts go HERE.

Nashville Mortgage Rates

More selling today in the equity markets today ahead of the long weekend.   Treasuries ralled with the 10 year note falling to 1.88% at one point this afternoon, with mortgage backed securities (MBS) continue to lag the decline seen in treasuries with the motivation for safety to treasuries in the face of never-ending news from Europe that in essence hasnt”t accomplished anything so far other than volatility in all global markets.

This afternoon’s $29 billion 7 year note auction was again met with strong demand as were the 2 and 5 year auctions earler this week.  Although markets will be open on Friday the hours will be shortned.  Mostly caretakers on the desks Friday;  unless there is some major news out of Europe Thursday or Friday, likely Friday’s activity will be quiet. 

Today Germany held an auction to sell bunds (German bonds)…it failed.  The auction bids fell short by 35% according to data from the Bundesbank.  That Germany couldn’t sell the bunds increased the view that the debt crisis in Europe is escalating;  the German 10 year bund yield at 2.09% and at one point up 25 bps today before settling back, but still up 17 bps after the auction.  Concern that the debt crisis will weigh on the global economic recovery was amplified by data showing European services and manufacturing output shrank for a third month, while a preliminary gauge indicate China’s manufacturing contracted by the most since March 2009.

The Fed told the 31 largest U.S. banks to test loan portfolios and trading books against a recession and a European market shock to ensure they have enough capital to withstand losses.  The Fed is likely to pressure banks to withhold paying dividends and increase capital just in case it all collapses in Europe.  The most severe test scenarios include a jobless rate of 13%, an 8% drop in GDP, and a 21% plunge in home prices.  The contagion is spreading again across Europe with Germany unable to sell its debt today.  Credit-default swaps insuring French government bonds rose 6 bps to 246, and contracts tied to Spanish debt climbed 2 bps to 488 – both are records.

Technically, the U.S. rate markets are in good shape; mortgage backed securities (MBS) though, while holding a slightly bullish trend, is continuing to struggle.  As long as the 10 year improves MBS’s will hold, but when the day comes when interest rates increase, selling in MBS’s won’t likely lag on the way down in prices.

Thanksgiving in the U.S. is a time to give thanks for what we have and to enjoy family and friends.  Many in the country will have a difficult time this year with high and long-term unemployment.  It is a time for sharing with those struggling, so let’s remember thos less fortunate this Thanksgiving. 

Another Nashville Mortgage Rates Update to be posted next week- have a great long weekend.

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.

Nashville Mortgage Rates

And another day where the stock market is controlled the bond and mortgage markets.  It isn’t a new thing, it has been that way for months.  If interest rates are to decline from here, it will likely be on the back of selling in equities.  Meanwhile, equity markets don’t appear to be weakening much even at the present levels of the indexes, as increasing numbers are climbing on board that the economy will continue to improve;  we are not in that camp, but with each run-up in inedexes, the boat we are in is becoming less populated.  Today, the 10 year note and mortgage bonds rallied when the Dow rolled over early this afternoon, but it is always the lst hour that is critical- indexes went positive about 2:30 EST and stayed up through the rest of the day.  The 10 year yield declined to 1.97% at its best today before crawling back to 2.00%, still unable to close below.

The only economic data today came at 3 EST this afternoon;  September consumer credit was expected up $5 billion, and it increased to $7.39 billion, but revolving credit declined again, the 4th month it has fallen, at -$627.1 million, it continued to confirm that consumers are not yet using their cards much.  Once again, it didn’t get any attention in market trading, consumers are still believed to be the drivers for the economy, not increasing credit with cards may be due to the outrageous rates charged by mega banks, but more likely due to consumers being cautious about the outlook for economic growth and jobs.

Tomorrow there is no data; at 1 PM the Treasury will auction $32 billion in 3 year notes.  Trade tomorrow will spin on anything out of Europe, unlikely there will be much from the region except the naming of the new prime minister and government in Italy.  The ECB saying today it will take two years to get their mess under control.  Time for the U.S. to move on and take Europe off the table on every syllable that is uttered.

Check back later this week for another Nashville Mortgage Rates Update.

Nashville Mortgage Rates

Europe and the financial crisis brewing over defaults of sovereign debt continues to drive huge volatility in U.S. markets.  Overnight, the Greek prime minister said he would now call for a referendum vote from Greeks on whether to accept the austerity conditions that are being forced on the country.  A referendum that is essentially a vote wheter to exit the EU (European Union) or increase unemployment for years to come.  If it were only Greece it would be simple, just let the country go on its way, but the dominos could fall with Italy and Spain and possibly France and the complete collapse of the European experiment.

The situation in Europe is completely unpredictable from day to day, setting markets in chaos with massive moves up and down in the equity markets and the bond and mortgage markets.  News this afternoon continued to add to uncertainty, a source from the Greek opposition party was out this afternoon saying the referendum vote was a dead issue.  The current situation in Europe is stretching nerves all across the region and is doing the same here.  No way can we have any certainty about what will happen in our markets tomorrow, the next day, or any day after that until Europe can get something done, which of course seems highly unlikely, based on the path it’s going.

It may be never, but I cannot recall any time when markets have been dealing with a problem for as long as Europe has.  Unless one has to be in the markets, the only rational thing is to be out and stay out.  Markets function on uncertainty, that is normal; however, what Europe is doing to global markets for all this time is without precedent.

More uncertainty comes tomorrow morning and into early afternoon…the FOMC policy statement will be out at 12:30 EST, then Bernanke with his press conference after that.  Then coming up on Friday the ever volatile October employemnt report.  About the only thing we can say for sure now is that the rest of the week will be just as, if not more, volatile.

When the 10 year note falls to under 2.00% (closed at 1.99% today), it is a good time to get financing done.  Waiting for lower rates is a fool’s game; not that it may not happen, but twice the 10 year note traded below 2.00% and both times it only lasted a day or so.  Markets are treading on virgin ground, and there is no history to look back on– rates are as likely to increase as they are to fall more.

Please check back this Thursday or Friday for the next installment of Nashville Mortgage Rates Update.

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.