US Refinancing Boom Seen At End As Long Treasury Yields Soar

Dow Jones Newswires | July 15, 2003 | Julie Haviv

[Starwind]

US Refinancing Boom Seen At End As Long Tsy Ylds Soar

. By Julie Haviv Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Tuesday's sharp sell-off in Treasury securities affirmed what many economists and analysts had believed: The end is very much in sight for the longest, loftiest refinancing wave in history. What's more, the end may be coming sooner than some thought.

Long-term mortgage rates are tied to shifts in Treasury securities, and when those yields rise, mortgage rates rise in sync. Long-end Treasurys sold off sharply after Federal Reserve Chairman Alan Greenspan, in testimony to the House Financial Services Committee, appeared to shoot down the prospect of the Fed taking unconventional monetary easing measures by buying such Treasurys.

By early afternoon, the 10-year Treasury note had lost 1 6/32 to 97 30/32, yielding 3.876%.

"Sometime within the next two to three weeks we will see the last gasp of air from the desperate home refinancer who feels he may have waited too long," said Drew Matus, U.S. financial markets economist at Lehman Brothers.

Refinancing activity was slowing even before Greenspan's testimony, with the Mortgage Bankers Association's refinancing index plunging 21.3% to 6769.3 in the week to July 4, the most recent week that data are available for.

And last week, Freddie Mac showed a sharp uptick in the 30-year fixed mortgage rate to 5.52% from 5.40% a week earlier. This week will also show an increase given the movement in Treasury yields.

The waning refinancing activity, however, won't have an immediate impact on the housing market, according to Matus.

"There is still huge demand for housing and concern about alternative investment vehicles, so I am hesitant to say that the housing market is going to slow down substantially in the near-term, but over time it will," he said.

Mortgage market participants are clearly signaling the end is near to refinancing too. During the refinancing wave, mortgage-backed securities with higher-paying coupons such as 6.5% and 7% were punished severely since they are the most vulnerable to refinancing activity. But those same securities are putting in a very strong performance Tuesday compared with their counterparts with lower-paying coupons such as 4.5% and 5%.

"This is a clear signal that we are at the end of the most recent refinancing wave," said Art Frank, director of MBS research at Nomura Securities International in New York.

Refinancing activity has been booming for about a year, with MBA's refinancing index peaking at a record high of 9977.8 in late May.

(MORE) Dow Jones Newswires

07-15-03 1328ET- - 01 28 PM EDT 07-15-03

[Starwind]

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[Think free or die]

Hmmm, glad we locked in our rate a couple of weeks ago.

[SquirrelKing]

Home equity loans and lines are STILL at all time loans. Visit your friendly neighborhood banker and apply today!

*shameless plug*

[Principled]

I closed at a 4.875 30 yr note. Unfriggin believable.

[proxy_user]

You type like me. My fingers know how to make words, but not what words to make. It's one of the disadvantages of distributed intelligence.

[Dog Gone]

I locked in at 4.375% last week. That seems more than reasonable to me.

[Think free or die]

Yup. We're closing this week on 4.875 for 15 yrs. We thought we were doing well in '93 when we bought our house and obtained a 30 yr loan at 6.75%. In December we reduced the term of our loan and dropped the rate to 5.625%. Now we're dropping the rate again - all zero fee refinancings. Not bad at all.

I never thought I'd live to see this. I still remember the 15% mortgages of the late '70's/early '80's. My first mortgage was a steal at 12% under the FHA program. Times sure have changed!

[imawit]

From inside the mtg industry ... the front end is closing down.

There will definitely be some last gasps. Potentially the FED could threaten to buy long bonds. Actually doing that is most likely an impossibility because of the signal that puts out which could be more harmful than the continuation of low rates and low T-bill yields.

It's still unfolding and it may not go smoothly, may go really haywire. If you look at why we went here in the first place, you'll find that nothing was accomplished but more debt and higher home prices. You could say that there were 3 six month periods of this scenario and the intended effect was not accomplished.

With no more housing expanding bubble, there's nothing else to look forward to unless you think S & P 1100 or 1500 is real and I think that's delusionary.

What else can I say, where's the next expansion ???? In general it's a wait and see and that is never good for markets. That's basically a shut down mode.

[IndyTiger]

Closed last week on a refinance from a 30 year at 6.625 to a 15 year at 4.625. Never expected rates to go this low.

[warchild9]

Eventually, the borrowing on borrowing on borrowing on debt has to stop, for consumers and for the Feds. When it does, reality will soon crowd out televised sports for the attention of millions.

[SquirrelKing]

loan=LOAN

loan=lower than a snake's @ss in a wagon rut

Me have problem with brain. Thank you for your pash... patia... patient... uh, time.

[Tauzero]

"When it does, reality will soon crowd out televised sports for the attention of millions."

That has been happening for some time, actually.

Look at ratings for major sporting events, i.e. World Series, NBA championships, etc., for the last several years.

[Principled]

Now to save that extra $!

Did you roll closing costs into the new loan, or did you opt for a higher rate in lieu of closing costs?

[steveegg]

Tuesday's sharp sell-off in Treasury securities affirmed what many economists and analysts had believed: The end is very much in sight for the longest, loftiest refinancing wave in history. What's more, the end may be coming sooner than some thought.

"Houston, we have a problem. We have a main bus B undercredit. We've got a lot of thruster activity here, Washington."

[Think free or die]

We opted for rolldown refinancings in which we avoided any points or fees. The rates were a little higher, but we didn't have any up-front costs.

[RippleFire]

bump

[imawit]

Looks like the Green Wizard no longer has the touch. Nothing nowhere in any market went the right way today.

Any bets on a rally anywhere. Stocks down, T-bills down, gold down.

[Principled]

IMO a great choice!