Relatively favorable jobless claims and a rally in the stock market Thursday reversed the course of mortgage rates, causing them to bounce back from what Freddie Mac's latest weekly survey confirmed have been a record lows.
Thursday as the Dow reversed what had been a more than 500-point decline, climbing more than 400 points, mortgage rates reversed course and trended upward. The long-term rate-indicative 10-year Treasury yield, which had fallen to a low of 2.13%, had risen back above 2.3% at press time Thurday afternoon.
Some of the industry stocks prices hit hardest Wednesday were still volatile but fared better in regular trading Thursday: Ellie Mae (up by about 1.6%), Bank of America (up by about 7%), and MGIC (up by around 14%). PMI was still down by roughly 4% but this was likely due to capitalization concerns that could jeopardize the future of the company.
Generally when the stock market rallies and the 10-year yield/rates rise, higher coupon MBS that are backed by loans with higher rates benefit, as the risk underlying loans will refinance declines and makes their relatively higher yields more attractive to investors.
With the Fed at its most recent meeting committing to lower short-term rates for a period of time some experts think the extent even longer-term rates such as the ones most mortgages carry may rise could be more limited.
Average rates over the most recent week have been the lowest they have ever been, according to Freddie Mac's survey for the week ending Aug. 11. During that time, the 30-year fixed rate mortgage averaged 4.32% the 15-year FRM averaged 3.5%, the five-year Treasury-indexed hybrid averaged 3.13% and the one-year Treasury adjustable-rate mortgage averaged 2.89%.
The FRMs during the week ending Aug. 11 had an average of 0.7 of a point while the five-year Treasury hybrid and one-year Treasury ARM had an average of 0.5 of a point.
Compared to the previous week, the 30-year rate was down 7 basis points, the 15-year rate was lower by 4 bps, the five-year Treasury hybrid rate fell by 5 bps and the one-year Treasury ARM rate dropped by 3 bps.
A year ago, the 30-year rate was 4.44%, the 15-year rate was 3.92%, the five-year Treasury hybrid rate was 3.56% and the one-year Treasury ARM rate was 3.53%.
— Brad Finkelstein contributed to this report.
