The Dow Jones Industrial Average took a 500+ point nosedive earlier this morning as fears over growing signs of a global economic slowdown sent capital scurrying for the relative safe-haven of dollar denominated assets like Treasury debt obligations and mortgage-backed securities.



While the infusion of additional buyers supporting steady to lower mortgage interest rates is certainly welcome - bear-in-mind these "safe-haven" investors are not acquiring Treasury debt obligations and mortgage-backed securities with the intent of holding these assets in their portfolio for an extended period of time. The majority of these "flight-to-quality" investors will dump their "safe-haven" investments like a hot potato the second the last panicked seller in the stock markets has been indentified and satisfied.



Morgan Stanley's index of global stocks is currently posting a forward-earnings ratio for MSCI index of 11.7 versus a 22-year average of 16.4. In other words, these riskier assets are approaching such heavily discounted values any perceived sign(s) of stabilization for global economic growth will send professional investors the world over into a swirl of activity redeploying capital back into riskier but higher yielding investments like stocks. The process, when it occurs, will create a significant amount of selling pressure in both the Treasury and mortgage-backed securities market.



The days of support for steady to fractionally lower mortgage interest rates from international "safe-haven" buyers could be numbered. With 8 out of every 10 loans in most pipelines representing refinance requests - it is critically important borrowers are aware how quickly their funding sources may dry up - even though all the current underlying government economic reports suggest rates should be moving yet lower.