With the growing threat of coronavirus throughout the world, financial markets have been reacting with some crazy swings lately. Earlier this week, the Fed announced yet another rate cut to try and spark a market comeback after major losses caused some panic.

Treasury Yield Market Impact

As of today, we are seeing some very extreme activity in the U.S. Treasury yields, and that is having an interesting effect on mortgage rates. 10-year Treasury yields are 40 basis points lower than they were just a week ago. This brings back memories of the 2008 financial crisis because we haven’t seen anything quite like this since the two most dramatic days of that market.

Outright yield levels were significantly affected. In 2008, yields plummeted to multi-generational lows of 2.04%. Today, they’ve been as low as 0.66%, which is astounding!

Where Are We Headed?

It’s hard to say exactly where markets will go as the coronavirus continues to spread with no known vaccine on the horizon. The market will likely bounce back quickly after such major drops. Corrective days of selling often follow these big losses, but we can’t be certain of anything for sure at this point. It could result in the return of the bond bull market, which many experts declared dead back in 2018. It is really going to be interesting to see how this unfolds.

Several Fed rate cuts have led to mortgage rate drops in the past year. However, rates are actually staying level or rising after this latest move by the Federal Reserve. The charts below (courtesy of mortgagenewsdaily.com) illustrate this unique phenomenon.

Zoomed in view of the same chart:

Mortgage Advice

It’s clear the markets right now are in a state of flux, and we may see even crazier trends in the days ahead. If you are in the process of buying a home or applying for a home refinance, it’s best to talk with a mortgage professional who understands the market and can give you the right advice.

For all your San Diego County mortgage needs, call Transparent Mortgage today at (619) 701-3906 or feel free to email me personally at beau@tspmortgage.com

Beau Hodson

Beau Hodson

About the Author Since 2003, Beau has been a mortgage professional and is a leading mortgage broker and lender in San Diego. As Founder and Senior Mortgage Advisor at Transparent Mortgage, he is truly committed to serving the needs of his clients and raising industry standards for integrity and transparency.