5.30.14: 10-Year Treasury Falls Further, Confounding Experts

The yield on the benchmark 10-year Treasury note fell further this week, closing at 2.46% on Friday after closing at 2.44% on Wednesday, the lowest closing yield since July 2013. The move caught just about everyone by surprise. I sure can’t figure it out, but here is what one of our investment banking partners is saying:

“Treasury rates have been rallying again with the 10-year Treasury now 50 basis points (bp) inside of where it was in January. The 10-year Swap rate is now 2.53%.

Three items that may be contributing to the movement:

  1. Draghi in Europe is saying that he’s planning to act quickly in the European version of QE, so the Euro should weaken. With the Euro at 1.35/1 U.S. dollar, the dollar should get stronger (Euro weaker). The U.S. deficit is shrinking with the United States borrowing less. With the German 10-year below the U.S. 10-year, Europeans are buying U.S. 10-year to receive higher yields and to put on long-dollar/short Euro trades.
  2. The 50 bp rally in the 10-year since January is causing a lot of pain for anyone short the 10-year with taper thoughts in their heads. Five months later, the shorts could be capitulating and unwinding their short bets, and this could be causing a short squeeze.
  3. The United States may not be doing as well as the press and the White House would like us to believe … Some think serious revisions to GDP are coming … possibly negative in the year-to-date 2014 second quarter. This should get better, but not great, as we move through the second half of 2014.”

“I spent last week in San Antonio with my partner, Jay Bhakta, spreading the word and drumming up quick-close business,” said Michael D. Sneden, Executive Vice President at ValueXpress. “We breathe rates day-in and day-out, but borrowers are not always aware. We will be sizing and quoting a whole bunch of loans this week as response to the lower rates has been strong.”

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This entry was posted in Commercial Lending, Commercial Real Estate Loans, Michael D. Sneden, News & Recent Closings, The Banker's Mortgage Conduit, Valuexpress and tagged , , , , , . Bookmark the permalink.

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