Fresh Worries from European Banks Spook Investors – Daily Mortgage Rate Update for September 8th, 2010
Banks understated holdings of riskier debt; Successful Treasury auction, more coming; Back to last week’s all-time best pricing – Daily Mortgage Rate Update for September 8th, 2010
Markets took a step backwards yesterday on news that the previously reported European Bank stress tests may have understated crucial information about that banking system’s exposure to troubled debt from weaker EU members such as Greece, Spain and Italy. The concern was unearthed by the Wall Street Journal in an article that suggested the 91 banks tested by the European Central Bank represent only a fraction of banks holding sovereign debt of that area’s most at-risk economies, and that as much as 75%-85% of holdings in certain countries’ debt was unseen by the tests.
Add this to the recently rising cost of default insurance on sovereign debt from the PIGS – Portugal, Italy, Ireland, Greece and Spain – and you have markets that are ready for a retreat. Most stock markets fell by about 1%, while stocks in European banks fell between 3-5%. Treasury yields retreated 9 basis points to 2.61%, and mortgage pricing improved throughout the day.
These worries also led to a very successful auction of 3-year Treasury notes in one of the US Treasury’s 3 auctions this week to fund government spending. Today, the even more influential 10-year Treasury auction will take place. Bi-weekly Treasury auctions give debt markets insight into the liquidity of debt markets and traders willingness to continue funding the US government deficit, as well as into the perceived risk of other investments. The riskier other investments look, the more attractive Treasury notes become, depressing yields.
Mortgage pricing has improved back to even with last week’s all-time-best levels as of close of business yesterday, although it is a little softer this morning. The bigger factor we’re seeing at this level is the unwillingness of investors to accept too low a return, and a high degree of volatility in pricing, with day to day swings larger than what we might see in a week in calmer times. This type of investing environment can be a real gut-check on some days, and quite rewarding on others.
With pricing at or close to its all time high today, and with traders reluctant to move prices higher, markets are presenting a compelling argument to get off the fence and lock in a rate, and that is looking more and more attractive given the roller-coaster-like ups and downs we’ve seen lately. Still, there also appears to be little compulsion among market movers to shift pricing lower, either. Because of this, my suggestion today is that loans within 30 days of closing should strongly consider locking as they have little to gain by waiting. Loans with a longer delay until closing can consider floating; while they may see some poor days to come, there will also be a better opportunity sometime after those days which will allow locking in rates comparable to current levels.
There isn’t much other data to move markets later this week, apart from tomorrow’s weekly unemployment claims. That report could cause quite a stir if it shows fewer than 465,000 Americans applied for first-time benefits. If you have questions regarding Rhode Island Refinance Rates, or whether or not to lock your loan, please don’t hesitate to contact me by cell at (401) 263-8655. Have a great day!
Related articles:
Daily Update for September 3rd
Weekly Recap for August 30th-September 3rd
Dan Hartman is a Senior Mortgage Advisor with Province Mortgage Associates, and serves as an Adjunct Professor of Finance and Economics at Roger Williams University and the University of New Haven. He has been helping homeowners and homebuyers with their mortgage questions for over 10 years.
September 8, 2010 by Dan Hartman · 1 Comment
Related Posts
- Jobless Claims Dip, But How Low is Too Low a Rate? – Daily Mortgage Rate Update for August 26th, 2010
- Corporate Profits Continue, European Banks Under Microscope – Daily Mortgage Rate Update for July 23rd, 2010
- BP Might Have Stopped Its Bleeding; How About Europe’s Banks? – Daily Mortgage Market Update for July 19th, 2010
I have worked as a residential mortgage advisor since February of 2000 and a part of the founding team here at Province Mortgage. We believe that by doing right by a family today, we can create a relationship for life, and, hopefully, and ambassador who will share the experience with others. It is our team of professionals that helps us to create this experience.
Comments
One Response to “Fresh Worries from European Banks Spook Investors – Daily Mortgage Rate Update for September 8th, 2010”Trackbacks
[...] The bigger issue was an announcement from the central bank of Japan that it would buy bonds in Europe’s struggling economies in support of the movement to stabilize those countries. China had made a similar announcement in [...]