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| The last time the 10-year yield was as low as it was this morning, the country was in the midst of the biggest refinance wave in its history.
The yield on the 10-year was 3.53 percent this morning, according to data from CNNMoney.com. The yield was down from 3.66 percent Friday, according to data from the U.S. Treasury. The price on the benchmark Treasury was 25/32 higher this morning. The 10-year rally was sparked by a world-wide selloff in stocks and a massive reduction of 75 BPS in the federal funds rate target announced by the Federal Open Market Committee today. The fed funds rate now stands at 3.5 percent. The fed said it also cut the discount rate by 75 BPS to 4.0 percent. “The Committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth,” the Fed said in a statement. “While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets.” Federal Reserve data indicate that the 10-year yield has not been this low since June 25, 2003, when it closed at 3.38 percent. The yield reached its lowest yield on record — 3.13 percent on June 13, 2003 — based on data tracked by the Fed dating back to 1962. In the week ending June 27, 2003, the Market Composite Index of mortgage applications was 1635.5 on a seasonally-adjusted basis, according to data reported by the Mortgage Bankers Association at the time. Refinances represented over three-quarters of all applications at that point. MBA’s application index reached its highest point during the week ended May 30, 2003, when it reached 1856.7. The Market Composite Index, which has recently been climbing, stood at just 906.4 last week, while refinance activity climbed to 63 percent of all applications. But the latest interest rate activity could help push fixed mortgage rates lower and boost refinance activity, though falling investor confidence in U.S. mortgage securities could mitigate some of the decline in mortgage rates. |
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