The Veridian Blog

The DOW is currently down over 300 points and NASDAQ over 80 after Friday evening's news of the S&P downgrade to US credit agencies sent ripples across the global economy.  While the downgrade itself is not good news for bonds because it makes US debt unattractive as we are less likely to pay back debt, the severe decline in equities has pushed up the demand for Treasuries.  The benchmark 10-Year Note, which started the day at 2.57%, plummeted to 2.40%.  It remains to be seen this morning what effect that will have on mortgage rates. 

It will likely take a sustained sell off over multiple trading days to see mortgage rates continue to decline.  Long-term, the credit downgrade does not help anyone.  The resulting effects on inflation and deterioration of future value will eventually pull bonds back, we just don't know when.  Stay tuned...