October 27th, 2010 9:15 AM by BILL WILBANKS
Yesterday had a solid $35 bln 2 year auction and there's another like amount up today on the 5 year notes with results usually posted after 1:30 PM. Overall yields on the 5 yr through 30 yr bonds have been up across the board by 7 bps +/-. Yesterday the 10 yr, tied the closest to mortgage rates, closed at 2.6466% and was as high as 2.71% at 8:25 ET this morning, running about 2 bp lower shortly thereafter.
As benchmark Treasury yields fall, prices of mortgage-backed securities will move higher, which allows lenders to offer lower rates. As those Treasury yields rise, mortgage-backed security pricing is led lower, forcing lenders to push mortgage rates higher.
So in the last couple weeks we've seen the extreme record low rate levels suffer a mini-death by a thousand cuts with points which push rate being pushed up ever so slightly a little at a time. How much any Fed QE2 Treasury purchasing will effect rates remains to be seen, especially with the latest rumor that they may now back off and only ease into it a few hundred billion at a time after next week's rollout. And we have yet to see home sales numbers after the September sales number (due out at 10 AM) finanlization of the last sales to take advantage of the Home Buyer Tax Credit. It had been extended from June then August. Numbers tanked in July before the extension. The time to be bottom feeding for rates may be temporarily over, but until proven dead it's still crystal ball y'all. Waiting for that last eigth in rate is still a roll of the dice and Vegas makes millions knowing the odds are in their favor.