 rate lock advisoryWednesday, November 9, 2011 - Article by: Richard Woodward -
Rate Lock Advisory - Wednesday Nov. 9th
The news from overseas that has markets in turmoil comes from Italy, where Premier Berlusconi has announced he will resign in two weeks. It appears that the markets don't want to wait that long or trust that he will follow through with his promise. What happened is their interest rates that will dictate the government's cost of borrowing spiked to 7.40% after his announcement yesterday, crossing the 7.00% threshold that is believed to have caused other European countries to need bailouts. The fear now is if their rates remain that high, another financial crisis could arise in that region, affecting the global economy. There is no relevant economic data being posted today, allowing the markets to react solely on Italy's news. Today's bond rally has pushed the benchmark 10-year Treasury Note below 2.00% again (currently 1.96%). It is my opinion that this is more of a knee-jerk reaction to the events than the start of a true long-term flight to safety for bonds. This means that I suspect this rally will be short-lived. Enjoy this morning's improvement in rates, but be careful if still floating an interest rate and closing in the near future. If I am correct and we see a reversal of this rally, this morning's gains could be erased in one intra-day revision. As expected, Mr. Bernanke's opening comments at a business conference this morning failed to bring us any highlights or surprises. It was a non-event in today's trading and mortgage rates. We do have the 10-year Treasury Note auction to watch today. Results of the sale will be posted at 1:00 PM ET, so any reaction to the sale will come during afternoon hours. If it was met with a strong demand from investors, bond prices may move higher later today, possibly leading to a small improvement in mortgage rates also. On the other hand, a weak interest in the sale could lead to an upward revision to mortgage pricing. |
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