Mortgage Rate Update November 10, 2011

Mortgage note rates are unchanged again this morning.

As I pointed out yesterday the US 10-year Treasury note is currently trading right near the important technical level of 2.00%.  Yesterday we managed to close below this level but this morning it opened up back above it.

Should the 10-year move convincingly below the 2.00% mark then this would likely cause mortgage rates to move lower.  However, if the yield on the 10-year ticks up above the 2.00% level then the current level of rates is the lowest we’re going to see.

What will be the catalyst for the 10-year Treasury yield to move?  Developments in Europe are the primary factor.  Yields moved slightly higher this morning after Italian leaders showed progress in making sweeping changes to replace leadership and enact austerity measures that would help that government service its debt burden and avoid default.  If Italy can execute these measures in short order it would likely cause rates to rise.

Back in Greece a coalition of government named Lucas Papademos as that country’s new prime minister.  It is still unlikely that anyone will be able to steer Greece away from default.

Speaking of government debt, the US Treasury is set to deliver $16 billion in 30-year bonds today.  These bonds are currently yielding about 3.00% (-.48% in inflation adjusted return) so analysts are worried that the auction may not draw much demand which could also push yields higher.

Current Outlook: cautiously floating but growing less optimistic so prepared to lock