Yields fell across the curve on Tuesday as stocks plunged, expectations of a recession rose, and the Fed cut the Fed Funds and Discount rates by 75bp, the largest single cut since 1982. While most of the move in Treasuries occurred before the Fed's 8:20am EST announcement, volatility continued throughout the day. The 35bp drop in the two-year's yield was the biggest single day decline since trading resumed after 9/11 and the 30bp decline in the five-year eclipsed the post-9/11 dip. The ten-year's nearly 20bp decline in yield was the biggest since the Fed's surprise January 2, 2001 rate cut. Impressively, spread products rallied with Treasuries and mortgage spreads actually tightened as the sharply lower overnight funding cost spurred buying. In addition, a steeper curve increases the value of short cash flows, justifying tighter spreads. The Fed's move boosted U.S. stocks yesterday with the Dow which was poised to be down 500 points before the Fed's move closing down only 128. This morning, the rally is continuing in Treasuries as stocks, except for those in Asia, are plunging. European stocks are 3-4% lower and Dow futures are down nearly 300 points. Yields are plunging this morning, bringing the two-year Treasury down to 1.89%. The bulk of the curve is down 10bp this morning. Fed Funds futures are priced at 2.88% in February and 2.09% in July.
FNMA 5.5% February Coupon
Currently UP 7+ 32nds
Current Indices
Index | Today | Yesterday | Month Ago | Year Ago |
Fannie Mae 6 Note | 4.74 | 4.77 | 5.55 | 5.75 |
1 Month Libor | 3.376 | 3.773 | 4.855 | 5.320 |
6 Month Libor | 3.164 | 3.490 | 4.717 | 5.391 |
1 Year Libor | 2.806 | 3.084 | 4.344 | 5.402 |
5 Year Treasury | 2.863 | 2.995 | 3.920 | 4.927 |
10 Year Treasury | 3.749 | 3.837 | 4.486 | 5.113 |
Prime | 6.500 | 7.250 | 7.500 | 8.250 |
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Larry - It is amazing how interest rates are right now. It is such a good time to buy a home in this market!