Puzzling Interest Rate Day
Some are handicapping the odds of recession at sixty five percent. Today consumer sentiment came in at a fifteen year low. The highly suspect and often revised jobs creation number came in at 94,000 jobs created in November, while the outlook was for 84,000.
Many have already determined that the Bush/Paulson mortgage bailout will do more harm than good. We are facing massive amounts of foreclosures next year and the year after that. The Fed is expected to ease rates next week. The only question is by how much.
So looking at all of this, it’s apparent that things aren’t going so well for the economy, which usually bodes well for bond yields. Well due to an extra ten thousand jobs being created, the ten year treasury bond added twelve basis points (.12%) to it’s yield. The ten year treasury sits at 4.12% as I write this. Go figure.
I expect a modest downward trend in treasury rates. I expect mortgage rates to follow suit. However we can be surprised with weakness in the U.S. dollar, which could cause rates to rise. Additionally, lenders might tighten up even more on lending, which could widen the spread among treasuries and mortgages. If the spread widens, you could see treasury yields go down while mortgage rates remain level or go up.
The bottom line is we should see decent rates but don’t get greedy because there are influences at work that can sabotage this scenario. If it makes sense and it’s a good rate, grab it. Pigs get fed and hogs get slaughtered.