Tag Archives: operation twist

10 year treasury moves up and the 30 Year mortgage rates are up


This is pretty interesting because this is the other direction than what the experts thought Operation Twist would have on the market.  John Murphy pointed this out earlier on his post, then tonight I saw the St Louis Fed had updated their 30year mortgage average rates.

There are 2 things I find really interesting here but can’t explain.

1) the spread gets larger between the mortgage rates and the 10 year treasury the lower the treasury goes.

2) the 10 year treasury is going up, when most thought it would go down as a result of Operation Twist.

Note: the 30 year mortgage is updated as of 10/13/2011.    The 10 year treasury is updated as of 10/11/2011 at 2.18%

Just curious what Edina Realty Mortgage rates are today…  Looks like they are heading up.

Today’s Mortgage Rates

The current interest rates shown below are based on a purchase of a single-family, primary residence. For current refinance rates, contact us

as of 10/13/2011 09:15 AM Central

Product Interest Rate APR
Conforming1 and FHA1 Loans
30-Year Fixed 4.250% 4.434%
30-Year Fixed FHA 3.750% 4.550%
15-Year Fixed 3.375% 3.692%
7-Year ARM 3.000% 3.238%
5-Year ARM FHA 2.750% 2.908%
Jumbo1 Loans – Amounts that exceed conforming loan limits1
30-Year Fixed 4.500% 4.644%

 Equal Housing Lender

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30 Year Fixed Rate Mortgage drops, is it the result of The Twist?


I had been posting every business day on the 10 year treasury and the 30 year mortgage since the announcement of Operation Twist.  The reason why I am posting info on the 10 year treasury is that the 30 year fixed rate mortgage tends to track closely. It is not tied directly together, but the 10 year treasury is used as a guide for banks when they buy and sell mortgages.

Earlier this week the 10 year treasury started moving higher.  The 30 year fixed rate followed upwards.  Yesterday I got busy and forgot to track these and sure enough – the 30 year fixed rate mortgage rate dropped today.

The 10 year treasury nudged down a bit today as did the 30 year fixed rate mortgage.  The national average rate for a 30 year fixed rate mortgage today is 4.01%.  This chart below shows the average 30 year fixed rate mortgage compared to the 10 Year Treasury.  The 30 year mortgage rate data is updated as of 9/29/2011, the 10 year treasury is updated as of 9/27/2011 at 2.01.  (today it closed at 1.96)

 

click to enlarge

Now let’s look at where Edina Realty Mortgage Rates are today.

Today’s Mortgage Rates

The current interest rates shown below are based on a purchase of a single-family, primary residence. For current refinance rates, contact us

as of 09/29/2011 03:10 PM Central

Product Interest Rate APR
Conforming1 and FHA1 Loans
30-Year Fixed 4.125% 4.308%
30-Year Fixed FHA 3.750% 4.550%
15-Year Fixed 3.250% 3.566%
7-Year ARM 2.875% 3.180%
5-Year ARM FHA 2.750% 2.908%
Jumbo1 Loans – Amounts that exceed conforming loan limits1
30-Year Fixed 4.375% 4.518%
Equal Housing Lender
I don’t know if the rates will drop further, it is possible I guess.  Many experts believe it will, I am still a little cautious.  The 30 year fixed rate mortgage hasn’t dipped below 4% since it has been tracked by the Feds, so this may be a glass wall that it can’t break through.  Judging by the graph, it appears the spread between the 10 year treasury and the 30 year fixed rate mortgage gets larger.  So the question is how much further does the 10 year treasury have to drop to pull the rate below 4%?  What do you think, post a reply.   It has certainly grabbed my interest again to continue following this.

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Mortgage Rates and Operation Twist – Day 6


Well, it looks like the Feds plan to lower rates may have backfired.  It is probably a bit early to make that conclusion, but the trend is beginning to point that direction.

Today the stock market rallied again pushing the Dow up about 146 point to close near 11,190.  The 10 Year Treasury went up 0.1120 (+5.88%) to close at 2.016.   That is trending higher which will push the mortgage rates higher if it continues.

Today’s Mortgage Rates from Edina Realty jumped about 1/4% on the 30 year fixed conventional today, probably due to yesterdays gain in the 10 Year Treasury.

Today’s Mortgage Rates

The current interest rates shown below are based on a purchase of a single-family, primary residence. For current refinance rates, contact us

as of 09/27/2011 02:38 PM Central

Product Interest Rate APR
Conforming1 and FHA1 Loans
30-Year Fixed 4.250% 4.434%
30-Year Fixed FHA 3.750% 4.550%
15-Year Fixed 3.250% 3.566%
7-Year ARM 2.875% 3.180%
5-Year ARM FHA 2.750% 2.908%
Jumbo1 Loans – Amounts that exceed conforming loan limits1
30-Year Fixed 4.375% 4.518%

Equal Housing Lender


There is a great article about The Twist from HousingWire:  Dallas Fed Chief Fisher not buying Operation Twist

 

Richard Fisher, president of the Federal Reserve Bank of Dallasis sticking to his contrarian view on the Federal Open Market Committee’s “Operation Twist” plan, saying it could be a confidence and jobs killer…

…”Implicitly, the program may also lift short-term sales, albeit mildly given the expectation that rates at the short end will remain at exceptionally low levels through mid-2013,” he said.

Fisher, along with Charles Plosser, president of the Philly Fed, and Narayana Kocherlakota of the Minneapolis Fed, once again dissented to the latest FOMC policy decisions, marking the most opposition on the committee in nearly two decades.

Read Full Article

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Operation Twist, and our housing market: Pretzel Logic


Pretzel

Image via Wikipedia

 Here we go again.. 

Operation Twist has been launched by the Federal Reserve.  The idea is the Federal Reserve will buy long-term T-Bills, $400 billion worth.  The theory is it will lower the long-term interest rates.  This is also supposed to give banks cash balances.  Sounds good, except it has been tried in the past and did not work.

The term “Operation Twist” comes from the early 1960s, when the Fed tried something similar. (It’s named for the Chubby Checker hit.) It may have had a small effect — one recent studyfound that it drove down the interest rate on Treasury bonds by 0.15 percentage points. But the effect on mortgage rates was smaller, and the effect on corporate borrowing costs was tiny.

Read Article from NPR

One problem, okay one of many problems…  Mortgage Interest Rates are already at record low levels.  This is not the problem with the housing market.  The housing market is suffering because of the high unemployment and underemployment.  You may argue: it is because of the foreclosures!  Well, sure – why are people going into foreclosure??  Maybe because of job loss and under-employment??

 I don’t care if mortgage rates are 2% or 4%, if  you are unemployed you still won’t buy a house!  

Let’s phrase this differently, someone will buy a house at 12% interest rate if they have a job before someone buys a house at 3% interest rate that has no job.

How did the market respond to this news?  Take a look at the Dow Jones chart for the day and see if you can identify what time the news was announced:

Welcome to the Lost Decade

I do hope this works, but I am not optimistic on this strategy at all…

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