Fed Twists, interest rates plummet
Helicopter Ben just resurrected a 60's program to twist the yield curve by swapping short term debt with long term securities. I suppose Chubby Checker will once again be popular as a result.
Anyway, interest rates on long term treasuries plummeted yesterday as a result with the 10 Year US Treasury (a proxy for mortgage interest rates) setting another new record low. Of course, the stock market tanked as well and this mornings futures look dismal (as I write this at about 8:30AM Eastern) as well with indexes set to open about 2 percent down. And Asia and Europe are already down even more.
They (the experts) seem to think it's more about the European sovereign debt crisis than anything else but the American economy is not exactly rocking and rolling right now. So I guess we could use Chubby to get out there and sing and dance!
The good news, lower mortgage rates are almost certainly guaranteed.
In addition to buying long term treasuries, the Fed plans to buy mortgage backed securities so for those of you planning on buying a home in Charleston, that's going to translate into great news on mortgage interest rates for the foreseeable future. I would expect to see fixed rate 30 year conventional loans offered in the high 3's very soon.
Below are charts (courtesy of MarketWatch) of 10 year US Treasuries from yesterday (the arrow indicates when the Fed made their announcement) and early trading this morning.
