What happened to Operation Twist?
Posted October 14, 2011
So as we end the week with a mixed bag of economic news – a much better than expected Retail Sales Report and a more subdued Consumer Sentiment Report – I’ve been asking myself the question – what happened to Operation Twist?
The latest round of Fed Action which was supposed to help keep Mortgage Rates at historic lows seems to have at least temporarily had quite the opposite impact on rates.
Now granted, while the initial reaction from Treasuries was a positive one – the 10 Year Yield moved to its lowest level on record at 1.69%, the result in days following has been a Yield as high as 2.27% which occurred earlier this week. This increase has helped put upward pressure on Mortgage Rates, moving us from an all-time low which we reached a few weeks ago. One note here is that even though rates have inched up over the past few weeks, they are still hovering at historic levels. The Fed has indicated that there may be QE3 in the future if economic conditions warrant such a move – obviously we’ll be watching this issue very closely in the coming weeks.
According to the Mortgage Bankers Association, Applications for Mortgages were up 1.3% for the week ending October 7th. Refinance activity still accounts for approximately four out of every five loans today, but purchases have started to see an increase recently– which is much welcomed news for an otherwise anemic segment of the housing market.
Foreclosures continue to be an issue for housing across the nation, and according to Realty Trac, Foreclosure filings increased less than one percent over the previous quarter – but even that small increase was an about face in the trend which had seen decreasing figures over the prior three quarters. Foreclosures as you know are a killer of home values in areas where they are of higher concentration.
Weekly Jobless Claims were still above that all-important psychological threshold of 400,000 and we’ll be watching very closely over the next two weeks the claims figures as well as the Unemployment Report for October. A worsening of the overall Unemployment Number in addition to continued European Debt woes could bring us a reversal in interest rate direction.