Wow! Did you see the DOW yesterday...What it means for Rates

Absolute chaos and pure panic on Wall Street yesterday as the DOW suffered it's largest single day fall in History, almost 1000 points. Stocks ended up down about 360 for the day, gains coming as word spread that most of those mass sell offs were triggered by computer programs, and someone had fat fingered their keyboard selling billions of stock instead of millions.

However, not all of the anxiety was due to an error. The issues with Greece are becoming more paramount by the day. The concern is that other countries, who are heavily invested in Greek debt, such as France and Germany will follow them into a financial black hole should the Greeks default on their promissory notes. France and Germany are widely considered to be the healthiest of the European Union (at least financially!). If Greece were to default on the loans France and Germany made, it would hurt their economies tremendously. Spain, Italy, Portugal, and Great Britain are widely invested in Greece as well, and are already paying the price. The Portuguese government is issuing 10 year bonds paying 11.5%!!!! That means they pay twice as much to borrow money as France does. Holy Cow!!

What does this mean for mortgages, i.e. why am i talking about it?? It is the flight to quality that results when stocks are in a wide sell off. Investors pull out of the stock market and invest in government debt (treasuries). The prices of the bonds go up, which causes the yield to fall. Mortgage backed security bonds are closely tied to these types of securities. That means...RATES FELL YESTERDAY! Bad economic news for most people is good news for those buying and refinancing. Rates are now at the lowest levels of 2010. Not quite as low as the tail end of 2009, but close. If you were sitting on the fence, you better jump off ASAP as rates move up much faster than they move down.

Call me with any questions. 936-447-LOAN!