The 10-year Treasury yield used as a benchmark for long-term mortgage rates dropped below the psychologically important 3% level Wednesday morning on the heels of more weak economic data, according to one expert.
“The economic news that has been coming across the past month has been really soft, that’s been pushing bond prices up, turning yields lower,” Patrick Hennessy, senior financial analyst at the Mortgage Market Guide, said. “Today especially we had the ISM manufacturing index that came in at a really, really dismal level.”
An ADP report that indicated private job creation in May was weaker than expected also contributed to economic pessimism in the market, Hennessy told this publication.
“This soft economic news that’s been coming across the past month has really put a dent in the stock market,” he said. As a result investors have been “rushing to the safe haven trade like a 10-year Treasury note.”
He estimated mortgage rates Wednesday morning were roughly around 4 3/8% to 4 3/4%.
“I think there are still people out there that can still refi at these levels, despite the fact that we have these tight underwriting guidelines,” Hennessy said. “There are still people out there with great credit.”
When asked how big the refi response might be, he said, “We’ll have to see how this plays out. We have the end of QE2 coming up, so that could be one headwind in the near future that could maybe press rates up a little bit. We’ll have to see how that plays out once the end of June comes and we get into July.”
