As the European debt crisis shakes up markets, Treasury yields are plunging — potentially bringing the refinance rally back to life.
On Oct. 6, Freddie Mac’s widely watched Primary Mortgage Market Survey indicated that the average 30-year fixed-rate mortgage fell to the lowest level on record: 3.94 percent.
The low rates pushed up refinance activity and had refinances accounting for more than 70 percent of new loan inquiries based on the U.S. Mortgage Market Index from Mortech Inc. and MortgageDaily.com.
But as government data was released indicated that the economy might be improving — rates shot back up over 4 percent and refinance activity retreated.
Now, as Greece’s prime minister is calling for a referendum on the bailout package from its European neighbors, that country’s increased likelihood of default has rattled world markets and had the Dow Jones Industrial Average down by more than 300 points during trading today.
The yield on the 10-year Treasury note has traded today at under 2 percent.
Last Thursday, when Freddie reported the 30-year mortgage at 4.10 percent, the 10-year yield closed at 2.42 percent.
The movement suggests that the 30 year could slip below 4 percent again — potentially putting a refinance rally back in play.
However, markets have been very volatile lately, with the Dow swinging hundreds of points between trading sessions. And with the Federal Reserve Board’s releasing a policy statement on Wednesday, more volatility could be ahead.