“Exceptionally low interest rates for an extended period of time” and announcing the decision to reinvest proceeds from maturing MBS/ Treasuries back into Treasuries is all to do about the markets. The flip flop in policy is a clear sign that the Fed is concerned about the economy and will keep their foot on the gas to accommodate a wishful recovery. Although yesterday’s trading session handled the news in stride, overseas markets (last night) didn’t like what they heard. Stocks in Asia and Europe took a beating, spilling over to stateside trading this morning.
Currently, the Dow is off a smooth 200. The Naz is not much better, off 60 points. 10 year notes are plus 20/32’s and mortgage backs are lagging behind, up 5/32’s. With the Fed once again the lender and buyer of choice, expectations are that they will purchase 15 to 20 billion a month. This move will keep Austin mortgage rates low as traders will adopt the old trading slogan, “Don’t fight the Fed”. In the news, our June Trade Deficit grew 8 billion to a record 49.9 billion. Imports grew, exports fall, in a simple formula that did the damage. Once again, this will be a drag on GDP.
We do have an auction today. 24 billion of 10 year notes hit the tape at high noon (cst). Look for this to be a bullet auction will traders falling all over themselves to buy. Put up a chart and all you see is a major bull trend. With the 10 year now at 2.71%, a breakout to lower yields/better mortgage pricing has been confirmed.
In this market, best bet for Austin mortgage borrowers is to take advantage of the historic low levels of Austin mortgage rates.
