An incredibly volatile week on the stock market spurred an all-time low for both the benchmark 10-year Treasury note yield and Freddie Mac’s 30-year fixed-rate mortgage average. A lot happened this week so let’s take a look at the highlights:
- Dow stays in correction due to virus fears and political primaries
- 10-year Treasury note yield drops below 1% for the first time ever
- Federal Reserve makes emergency rate cut of 50 bps
- Mortgage rates hit all-time low (Freddie Mac 30-year average)
- Jobs report
Stock Market
This week saw 1,000+ point swings in both directions for the Dow Jones Industrial Average. Positive gains to start the week were quickly lost due to the fear of the spread of the coronavirus. The Federal Reserve’s decision to make an emergency rate cut did not help to rally the market and instead resulted in more investors purchasing government bonds. The markets rallied on Wednesday, the day after the Super Tuesday primary results. That rally was short-lived as Thursday produced yet another round of selloffs.
10-year Treasury yield
The precipitous fall of the benchmark 10-year Treasury note yield has been the thing to watch as the stock market volatility extends. The yield hit multiple record lows this week, dipping as low at 0.833% Thursday night before dropping again Friday morning, hitting 0.75% and slipping even further as the morning progressed. Treasurys and gold are considered safe havens during times of uncertainty in the stock market. Gold prices saw a gain of 1% which is the commodity’s best performance in about eight years.
Federal Reserve
The Federal Reserve made a resounding statement when it decided to ease overnight lending rates. This move was made two weeks prior to the regularly scheduled Federal Open Market Committee meeting. This is the fourth rate easement in a year as the Fed lowered rates three times in 2019.
Many times, people think that when the Fed eases rates, that means their mortgage rates automatically go down, too. But that’s not always the case. Watch the video below to get a better idea of what changes for you when the Fed eases rates.
Mortgage rates
Mortgage rates hit an all-time low for the Freddie Mac 30-year fixed-mortgage average. The average rate this week was 3.29% compared to 4.41% in 2019. Low rates like this resulted in a massive spike in mortgage rate lock volume. Movement Mortgage saw its highest rate lock volume in company history on Monday, March 2.
According to data from Black Knight, the drop in rates made 11.1 million Americans “refi eligible.” That means the borrowers have an interest rate at least 0.75% higher than the current rate, have a credit score of 720 or above and have enough equity in their home to get the loan.
The Mortgage Bankers Association recorded a sharp increase in weekly refi applications, showing a 26% increase last week. That means year-over-year, refi applications were up 224%.
Jobs report
The February jobs report smashed expectations, adding nearly 100,000 jobs more than expected. The total nonfarm payroll jobs added totaled 273,000 while unemployment dropped back down to 3.5%. However, that did little to stabilize the stock market as the Dow futures opened with an 800 point loss and the 10-year Treasury yield dipped below 0.7% to start the day.
The ADP Moody’s private payroll report this week showed private payrolls increased by 183,000 in February. That’s well above the estimate of 155,000.
Mark Zandi, chief economist at Moody’s Analytics, said in a statement, “COVID-19 will need to break through the job market firewall if it is to do significant damage to the economy.” He added, “The firewall has some cracks, but judging by the February employment gain it should be strong enough to weather most scenarios.
