Like the 4 Horsemen of the Apocalypse, the global economy is faced with 1) slow US recovery from The Great Recession, 2) Ebola, 3) Putin and Russia and 4) a stagnant Europe. All these factors are helping push Treasury and mortgage rates down … and increasing uncertainty.
Bloomberg – Prashant Gopal -The drop in mortgage rates below 4 percent has cut into Debra Shultz’s sleep. The New York City banker is busier than she’s been in months, working with three dozen homeowners eager to lower their payments.
Shultz helped a Greenwich Village homeowner on Wednesday lock in a 3.63 percent interest rate for a 30-year fixed jumbo mortgage of more than $900,000. An hour later, the rate jumped to 3.75 percent. One lender changed its rate sheet six times that day.
“It just went crazy,” said Shultz, a senior vice president of mortgage lending at Guaranteed Rate in New York. “I sent out a blast e-mail to 1,600 clients and had 30 responses right away.”
Mortgage rates are following a slide in 10-year Treasury yields as weaker-than-expected economic data from Germany to China combine with concern about the Ebola virus, sparking demand for safe investments. The average rate for a 30-year fixed mortgage dropped to 3.97 percent, the lowest since June 2013, Freddie Mac said yesterday. Borrowing costs spiked in September before dropping for the last four weeks, giving owners a new opportunity to refinance.
“This is bizarro world,” said Anthony B. Sanders, an economics professor at George Mason University in Fairfax, Virginia. “Usually we associate lower interest rates with lower volatility. Now you’re seeing the opposite.”
Yup, the Bankrate 30Y mortgage continues to fall with the US Treasury 10 year yield, yet the Bankrate 10 year rate is showing considerably more volatility.
And here is the interest rate volatility cube in 3D.
Yes, it is a Bizarro World for bonds and mortgages with head Bizarro Janet Yellen calling the balls and strikes.