With the stock market getting pounded on Wednesday, the yield on the 10-year Treasury fell to 2.89%, a level not seen in more than a year.
Since mortgages are priced off the benchmark note, it's anticipated that rates could fall even more, spurring additional refinancings and maybe finally spurring an extremely weak purchase market.
Stocks tanked during — and in the wake of — testimony by Federal Reserve chairman Ben Bernanke who told the Senate Banking Committee that the central bank stands ready to ease monetary policy further if the budding U.S. economic recovery stumbles. Bernanke called the nation's economic outlook "unusually uncertain."
A representative of Jefferies' Treasury trading desk told National Mortgage News that the market has been busy digesting Bernanke's speech. The yield on the 10-year has not been this low since the first-half of 2009. One MBS investor said he thinks it might even fall to 2.5%.
