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Plunging Stocks Drive Down 10-Year Yield

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The yield on the 10-year Treasury note sank today with stock prices as the European debt crisis escalated and fueled anxiety among investors. The activity could have the 30-year mortgage falling below 4 percent again.

In late afternoon trading, the Dow Jones Industrial Average was trading down more than 370 points. The index fell below the 12000 market to around 11,800.

Investors were reacting to worries about Italy’s sovereign debt and its struggling European neighbors. While concerns about Greece had been dragging down global financial markets, Italy’s debt is far bigger.

Greece’s outstanding government debt in less than $0.5 trillion, while Italy’s exceeds $2.0 trillion.

The volatility had investors rushing to Treasury bonds — pushing the yield on the benchmark 10-year Treasury note down to 1.97 percent.

A week ago, the 10-year yield was 2.03 percent.

Given that the 30-year fixed-rate mortgage averaged 4.00 percent in Freddie Mac’s Primary Mortgage Market Survey for the week ended Nov. 3, the 30 year could come in lower tomorrow or in next week’s survey (the rates in Freddie’s survey are based on quotes from today and yesterday — when the 10-year Treasury yield closed at 2.10 percent).

The record-low for the 10-year yield was 1.72 percent on Sept. 22.

The 30-year mortgage fell to its lowest level on record, 3.94 percent, in Freddie’s survey for the week ended Oct. 6.

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