Yields on 10-year Treasury notes dropped below 4 percent for the first time in two-and-a-half years Monday, as investors pulled money out of equities for the safe haven of bonds.

Yields on the 10-year Treasury note fell to 3.83 percent Monday, down from a recent high of 5.26 percent on June 12. The 10-year Treasury note is closely watched in the real estate industry because it tends to track with interest rates on 30-year fixed rate mortgages.

While yields on 10-year Treasury notes have been falling faster than 30-year mortgage rates — the spread between them has increased from 1.5 percent in June to more than 2 percent this month — 30-year mortgage rates are headed down, and are nearing 6 percent.

Freddie Mac last week reported that interest rates on 30-year fixed-rate mortgages averaged 6.2 percent with an average 0.5 point, down from a recent high of 6.73 percent in July. Last week’s average rate was the lowest since May, when lender’s charged an average of 6.15 percent.

More bad news about financial markets outweighed reports that retailers did brisk business after the Thanksgiving holiday, sending the Dow Jones industrial average down.

HSBC Holdings on Monday said it will move two structured investment vehicles (SIVs) it manages totaling $45 billion onto its balance sheets, providing up to $35 billion in funding as debts issued by the two SIVs mature.

Existing investors will continue to bear all economic risk from actual losses up to the full amount of their investment, HSBC said in a Securities and Exchange Commission filing.

Because they rely on short-term “commercial paper” loans to finance mortgages and credit card debt, some SIVs have run into trouble when they are unable to roll over, or refinance, those debts because of fears about rising delinquencies and foreclosures. Several other banks have established a multibillion-dollar investment fund intended to lessen the SIV credit crunch (see Inman News story).

Also Monday, the Federal Reserve Bank of New York said its Open Market Trading Desk will provide $8 billion in funding to financial markets in the first of several such planned actions.

The move was a response “to heightened pressures in money markets for funding through the year-end,” the bank said. The trading desk “plans to provide sufficient reserves to resist upward pressures on the federal funds rate above the … target rate around year-end.”

From InmanNews