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.

Nashville Mortgage Rates

The MBS market had exceptional volatility today; price changes were coming at movemeent of 15 basis points on most changes throughout the day.  I am not sure why the volatility is there, but usually when we see those kind of changes in 5 minute intervals, it implies very thin trading.  Probably the biggest hurdle we now face at the long end of the yield curve (mortgage rates) is the low rates themselves.  When the Fed announced Operation Twist on the 21st of September, the 10 year treasury and mortgage bonds delined 30 basis points in rate  (.30%) in two days, then spiked back up over the next week, keeping the 10 year note under 2.00%, which will not be easy to hold going forward.

Another problem facing the bond market at the long end of the yield curve was Bernanke’s comment today in his testimony, when he said to the Joint Economic Committee that Operation Twist would lower long term rates by 20 basis points (bps).  When the Twist was announced, the 10 year note traded at about 2.00%, so 20 bps takes the note to 1.80% to 1.70%, and we already hit it.  Not certain how investors will take that comment, but if Greece does dodge default this time, the US interest rate markets may increase some.  Conversely, a Greek default will likely drive the 10 year down to 1.50% levels, however mortgage rates won’t fall anywhere near that much.  Recently, treasury yields have fallen more than mortgage rates.

Tomorrow are two key releases; at 8:15 EST, ADP will be out with its estimate for private job growth in September.  Estimates are for an increase of just 45k jobs – 45k is really ZERO in the real world.  At 10:00 the ISM services sector index is expected at 52.8 from 53.3 in August.  Yesterday the ISM manufacturing index was better than expected, but didn’t generate any optimism in the markets.

There is way too much volatility at thes levels to speculate; if you are closing your loan within the next 15-20 days, the prudent thing would be to go ahead and lock in your mortgage rate.

Please visit us frequently for more Nashville Mortgage Rates Updates to help you stay on top of what’s going on in the market, or better yet, just subscribe to my blog on the right.

Nashville Mortgage Rates

The August employment report shook up markets- no job creation in August and 58k less jobs than reported in June and July.  The unemployment rate did however remain unchanged at 9.1%.  The report raises more questions than answers…will the Administration and Congress put aside the ugly show they put on in July and August?  Will the Fed do another easing move at the September 21st FOMC meeting?  If so, what kind of an easing?  There is an increasing idea floating around that the Fed may change its balance sheet, less at the short end of the curve (2-5-7 year treasuries) and more at the long end (10 year note) with the idea of driving down long rates that set the course for mortgages, thus increasing refinances and possibly purchasing. 

The next major event is Obama’s speech on Thursday evening.  He telegraphed he would make a major address 2 weeks ago.  It could be that employers didn’t hire in August until they hear what he offers up, and how Congress  (Republicans) will take his proposals.  Finally, consensus is building within markets that the main problem for the economy is the housing sector- woo hoo- it’s about time!   The Fed can get rates down but that in itselft won’t help much; there must be a plan to ease the criteria that now keeps huge numbers of homeowners and would-be buyers from being able to refinance or buy. 

Thursday’s speech is the most important in Obama’s tenure.  If he doesn’t offer up new initiatives and cannot bring Republicans into the fold, if he fumbles as he has in most all his so-called major addresses, the equity market will likely implode.  Besides the obvious things, we would suggest he calls for a repeal of the Dodd/Frank legislation.  It would be a gutsy and politically serious slap at his political leaders in Congress, but there is little doubt anywhere that the Dodd/Frank bill was a hasty, panic-driven huge mistake.  Time to admit it and move toward changing most of it.  He isn’t likely to do it though…politics still rules.   But if he did, his approval rating would jump substantially and it would put the onus on Republicans to get off their high horses in cooperation.

A long weekend ahead.  European markets will be open Monday, we won’t.  Any news on Europe’s debt issues and how the markets trade Monday will likely set the tone Tuesday.  The 10 year note is at 2.00%, another test of its modern-day record low.  We’ll have more Nashville Mortgage Rates updates for you next week.  Until then, have a great Labor Day weekend.