THE BASIS POINT

Why Record Low Rates May Tick Even Lower

 

Remember Last August 19th? On that day in 2011 my RateWatch #789 carried the forecast by Jim Grauer that the 10-year yield would fall to 1.46%. Here’s what it said:

Not Sure If We Have Been Here Before

We appear to be at a time when the U.S. consumer has completely lost confidence in the economy and the ability of anyone in government to do anything about it. If you read Jim Grauer’s content in the Technicals section you will see that we may be preparing to move to a time when wealth holders choose to hold cash, U.S Treasuries and perhaps gold. If 10-year Treasury yields fall well under 2% folks may look to MBS for yield.

This is not merely about people getting into a funk. This is about the fact that fiscal policy has failed, monetary policy has failed and no politician has anything real to offer. The consumer and the investor are about to shed what hope they have left.

This could result in massive losses to equities as folks move from risk assets and park their wealth in cash, gold, Treasuries and MBS. The speed and depth of this could be frightening. If what Grauer forecasts or even if half the move he forecasts happens we will see record low home loan rates.

What was foreseen last August appears to be happening now. The massive lack of confidence in the EU and bumpy US economy is causing flight-to-quality buying of Treasury and mortgage (MBS) debt.

As such we may see record lows tick even lower, like we have the last five weeks.

Per Grauer’s comments above, we may need to have the daily tech run through a bearish correction cycle (higher yields and rates) and the next daily bull cycle could see that 1.47%.

This means that the low would be achieved 4-6 weeks from now.

These new lows will create opportunities to refinance at record low rates.

What is really going to happen depends on the perception of what will happen in the EU and that is unpredictable and very slow moving.

We’ll be tracking it … stay tuned: Twitter | Facebook | Stocktwits

Related:
REFI ROADMAP: A LOCKED RATE ISN’T A CLOSED LOAN

$MBB, $TLT, $ZB_F, $ZN_F, $TNX, $TYX

 

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Comments [ 2 ]
  1. Dicklepre says:
    May 18, 2012 at 5:03 pm

    Grauer believes that the bond will stall its extended bullish run, correct and when another bull cycles occurs we could se that 1.46% bottom. The daily tech is massively overbought. Every time in the past 10 years that the stochastic tech (the K/D) reached this level it corrected.
    The daily tech cycles typically last 15 days but we are in the 55th day of a bull cycle. If the 15 days cycles return, the bottom might occur in 30 days. Then again, we are in strange times.

    Reply
  2. Pittsburgh Mortgage says:
    May 21, 2012 at 9:09 am

    I’m not so sure…I’ve been hearing a lot about how the housing market is finally becoming a sellers’ market again, and that that’s going to coincide with higher interest rates.  1.46% sounds a little nuts, given that we’ve still been hovering around 4 for months…and that the economy and housing market may actually start picking back up again.

    Reply

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