Interest Rate Outlook Calm

The U.S. Treasury easily sold $44 billion worth of bonds this week.

Combine that with the low consumer spending numbers released today and the expectation on Wall Street is that interest rates will stay low.

California is putting up $3 billion in bonds.

The Los Angeles Times reports:

The two-year T-notes were sold at an annualized yield of 1.02%, compared with an expected yield of 1.05% in a Bloomberg News survey of bond dealers.

Investor bids totaled $3.63 for every $1 in notes offered, a huge increase from the average $2.77 in bids per $1 offered at the last 10 auctions of two-year notes.

Ian Lyngen, a government bond strategist at CRT Capital Group in Stamford, Conn., called it a "very strong auction."

MORTGAGE RATES HAVE BEEN CREEPING UP THE PAST THREE WEEKS.

This bonanza Treasury sale of bonds should help put a stop to this rise.

Mortgage rates remain near record lows.

The Los Angeles Times reports:

The average 30-year fixed rate as calculated in the Freddie Mac survey bottomed out at 4.87% two weeks earlier with similar points and fees.

Freddie Mac economist Frank Nothaft said consumers continue to seek the stability of fixed-rate loans, which remain extraordinarily low by historical standards, even though 5/1 adjustable rate loans — mortgage fixed for the first five years before becoming adjustable — could be had with an initial rate of 4.4%. Only 6% of mortgage applications in September and October have been for variable-rate loans.

WITH INTEREST RATES GOING UP, refi applications etc are going down. There were far fewer applications for mortgage loans. The housing market remains weak.

The Los Angeles Times says:

Demand for home loans is slipping a bit now that the average interest rate for traditional fixed-rate loans is back above the psychological trigger of 5%.

The latest survey by the Mortgage Bankers Assn., out today, shows that applications for home loans fell more than 12% last week. Applications to refinance homes were off by more than 16% compared with the previous week. Applications to buy homes were down more than 5%, the trade group said.