29 May Italy Rocks the Markets
Mortgage bonds continue to climb higher, fueled by continued fear out of Italy that the European country will be unable to make its debt payments. This is causing speculation that Italy could be removed from the EU. That would have wide spread financial implications on a world-wide level. When you think about the impact Brexit had on the financial markets, this would be a similar situation, but for Italy vs. Great Brittan. This would cause another mass movement of cash into the United States as people in Europe and across the globe look for a safe place to park their money, as the United States is still considered the safest holding place to protect wealth.
Stocks are down sharply on the news, with the Dow Jones currently down more than 400 points. Further, the 10 Year Treasury Note yield has fallen from its 7 year of 3.11% high down to 2.77%. This is a significant move, as it puts yields back beneath the critical 3.04% level that currently reflects the top of the trading range that has been in place for 30 years. If yields can stay beneath this level, we have hopes that mortgage rates can improve in the near term.
Although there is no rush to immediately lock, the run up in the bond market has led to more than a 140 basis point improvement. There remains a great risk in floating. If you aren’t a risk taker, it’s a good time to take your chips off the table and secure a rate.