The latest round of weaker-than-expected U.S. employment numbers had driven the long-term rate-indicative 10-year Treasury yield to yet another record low below 1.5% at deadline Friday morning, when the Dow was down more than 200 points on the day and some struggling industry stocks were taking losses in value as high as 6% or 7%.
The 10-year yield had fallen as low as 1.44% at one point Friday morning, according to Yahoo Finance.
Suffering the biggest losses in this publication’s Mortgage Industry Equity Composite were mortgage insurer Radian, which at deadline late morning was down more than 7% and builder KB Home was down more than 6%.
However other market participants such as smaller financial institutions, real estate investment trust PennyMac and vendor Fidelity National Financial experienced smaller percentage gains more in line with or slightly less than what at the time was the Dow’s overall 1.75% drop. One of the largest market participants in the index, Bank of America, was down more than 4%.
A silver lining to the combination of an “ugly” jobs report and continuing overseas financial concerns could be that these will spur not only more record-low rates, but also additional rate-lowering moves by the Fed, said Credit Suisse chief economist Neal Soss in the company’s monthly strategy call Friday. Fed moves could include the purchase of more mortgage-backed or Treasury bonds.
Low yields on the secondary market will move mortgage rates lower but do take time to translate through to the primary market and constraints on industry financing continue, Mahesh Swaminathan, head of residential mortgage-backed securities, said in response to a question during the call.
The continued improvements in affordability have played a role in some signs of relative improvement in the housing markets, Dan Oppenheim, head of homebuilders and building products sectors in equity research, told listeners to the call.
The high shares of distressed home sales are decreasing even in hard-hit areas like Phoenix, for example. Forty-five percent of sales are still distressed in that market, but this is up from a two-thirds distressed sales rate in that market.
