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30-Year Headed Below 4%?

Rates

A Treasury rally could have the 30-year mortgage yield falling into the high threes.

When Freddie Mac reported in its Primary Mortgage Market Survey for the week ended Aug. 4 that the 30-year fixed-rate mortgage averaged 4.39 percent, the yield on the 10-year Treasury had closed the night before at 2.64 percent.

Tuesday, the Department of the Treasury reported that the 10-year Treasury yield closed at 2.20 percent. The Treasury rally came as the Federal Reserve Board said it would keep rates low.

The Dow Jones Industrial Average also rallied, closing up 429 points to 11,239.

Based on historical data, the 30 year fell to its lowest level ever — 4.17 percent — during the week ended Nov. 11, 2010.

The 44-basis-point decline in the 10-year yield since Freddie’s last report suggests that the 30 year is in the process of crashing through its prior record low.

Even building in a widening spread between mortgage rates and Treasury yields, a 30-year mortgage in the high threes is not out of the question.

A pricing inquiry on Mortech Inc.’s Marksman pricing engine indicates that a 30-year refinance on a $200,000 loan in Dallas is priced at 4.000 percent at a quarter point.

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