Mortgage Rates Appreciably Lower After Geopolitical Headlines

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Mortgage rates moved more decisively lower today, though not for any stable or happy reasons.  Such is often the case with interest rates.  As economic conditions worsen or as terrible events around the world fuel demand for bonds, prices of those bonds rise, causing rates to drop.  This was the case today for US Treasuries as geopolitical events rocked markets.  Mortgage-backed-securities (the bonds most directly responsible for mortgage rates) tend to move in the same direction as Treasuries.  Today was no different, but with geopolitical headlines moving markets, Treasuries get more of the benefit because they're a more readily available "safe-haven" asset.

The events in question include the shooting down of a Malaysian airliner near the Ukraine/Russia border as well as the inception of an Israeli ground-based assault on Gaza.  There were other considerations in play today, but these were the biggest.  The net effect was strong and steady improvement in bond markets and several instances of mortgage lenders revising rate sheets lower during the day.  The gains leave 4.125% as the most prevalently-quoted conforming 30yr fixed rate for top tier scenarios.  The ability for rates to remain this low or move lower is limited only by the geopolitical strife to continue escalating.  Once it stagnates or improves, rates are likely to snap back higher.  Even then, we have yet to see a move outside the 2-month range.

Loan Originator Perspective

"The Malaysian Jet incident today created a bit of geopolitcal risk helping bonds and therefore mortgage rates improve today. On a technical basis we've moved nicely down to a floor in pricing but it appears we've been unable to break through this floor to prove this rally has more legs. Given that, I believe short term closings should stronglyconsider locking to reap the gains we've experienced. Folks with a longer term to closing can likely keep a floating with a cautious and attentive stance and a close connection to your loan officer." -Hugh W. Page, Sen. Mortgage Consultant, Capital Partners Mortgage

"FLOAT--Treasuries have moved towards 2014 lows, and Mortgages are trailing, slowly, behind. If treasuries simply hold these levels we'll see rates improve. As always, though, be ready to lock if momentum changes quickly." -Brent Borcherding, www.brentborcherding.com

"News of the Malaysian airliner being shot down over Ukraine has sparked a flight to safety trade where investors sell stocks in favor of bonds. The news helped push the benchmark 10 year note to the bottom of our recent range at 2.47 which has been very solid resistance. I have been saying the last few days to float the highs and lock the lows....however, we just received breaking news of a ground invasion of Gaza by Israel forces. This news has pushed the 10 year even lower. At this point, lenders will be very slow to pass along the improvements. Even though we are at the best levels in quite some time, I would recommend to float overnight to allow lenders additional time to pass along these improvements. " -Victor Burek, Open Mortgage

Today's Best-Execution Rates

30YR FIXED - 4.125
FHA/VA - 3.75%
15 YEAR FIXED -  3.375%
5 YEAR ARMS -  3.0-3.50% depending on the lender

Ongoing Lock/Float Considerations

The hallmark of 2014 so far has been a disconcertingly narrow range in rates.  Too many market participants bet on rates going higher in 2014, and markets have punished that imbalance with a paradoxical move lower. As of June, rates were officially lower year-over-year, but that's due to rates' path higher in 2013.  The current path in 2014 remains sideways.  European markets continue to play a nagging role in the background, generally helping rates in the US remain lower than they otherwise might be.  From a wider point of view, we're in limbo, waiting for the first significant move away from the narrow range.  A rally into late May stood a chance to act as this break, but rates have since returned to what were previously the lower limits of the 2014 range. As always, please keep in mind that the rates discussed generally refer to what we've termed 'best-execution' (that is, the most frequently quoted, conforming, 30yr fixed rate for top tier borrowers, based not only on the outright price, but also 'bang-for-the-buck.'  Generally speaking, our best-execution rate tends to connote no origination or discount points--though this can vary--and tends to predict Freddie Mac's weekly survey with high accuracy.  It's safe to assume that our best-ex rate is the more timely and accurate of the two due to Freddie's once-a-week polling method).  Chief Operating Officer, Mortgage News Daily / MBS Live A former originator, Matthew began writing for Mortgage News Daily in 2007, covering a wide range of topics. Seeing a need in the marketplace, his focus increasingly shifted toward relating MBS and broader financial markets for loan originators. ... more

Mortgage rates stable to slightly lower

Mortgage rates settled barely lower in most cases today, although some lenders were unchanged or slightly higher.  It's a slow start to the week in relation to the financial markets that underlie variations in the rate by far.  There is no economic reports important and markets generally moved in unison from headlines geopolitical (i.e. fellows and rates are high and low, other).

With the limited motion, 4,125% rest most commonly cited conforming 30 year fixed rates for higher level scenarios.  All changes between quotation marks this weekend will only affect closing costs, and even in this case, they would be minimal.  It also means that rates remain well inside a narrow range in the last two months, even though they are closer to the lower end of the range at the moment.  While the new improvement can never be ruled out, the last time rates were this low were all good opportunities to lock.

Creative lending Perspective

"We started rallying week in the best mortgage price of only sell a little, that the afternoon passed. We are somehow at a critical time sitting near the ground where the rate drifted down to rates, but I think that we must go further down through this level to confirm this momentum to lower rates and to confirm a floating bias. Then, closures in the short term (less than 15 days) should seriously consider locking here. Closures of longer duration can probably maintain a wait and see position until we get confirmation on the direction."-Hugh W. Page, Consultant mortgage Sen, Capital mortgage partners

"I think that locking is a sound approach and today." We are at or near lows over 10 years for the last 3 months and if we get the data to be used for the maintenance of a subway, the next step would be upwards of in the sector. "Take your earnings, lock and be happy!"-Brent Borcherding, www.brentborcherding.com

"Increased geopolitical tensions that normally help push more low rates do not have this effect on the markets." If rates are not moving lowest they remain at low levels due to geopolitical tensions. If it's rate can climb in a hurry should tensions ease considerably. "Anyway you look at floating is a but risky at the moment."  Manny Gomes, Manager of the branch, Norcom mortgage

"Geopolitical risks continue to occupy their rates down but the 10 year note do not like the weather below 2.47. Rates today are as good as they have been in about a month. My recommendation is to block if you're in the 15 days and longer closures term might consider locking as well. With floating from geopolitical tensions is that can relieve tension and all the recent gains can be taken away quite quickly. Conditions in Ukraine and Palestine should probably get worse for lower movement rates in the near term."-Victor Burek, open mortgage

Best performance of today rate

30 year fixed - 4.125
FHA / VA - 3.75%
15 YEARS FIXED - 3.375%
5 year arm - 3.0 - 3, 50% depending on the lender

Considerations of course/float lock

The hallmark of 2014 so far has been a disconcerting range restricted in the tariffs.  Too many market players bet on rates increasing them in 2014, and markets have sanctioned this imbalance with a less paradoxical movement. From June, the rates were officially lower-year, but it is because of the trajectory of the rates higher in 2013.  The current path in 2014 remains on the side.  European markets continue to play a role in the background, haunting generally helping rates in the United States remain lower than otherwise, they could be.  From a broader point of view, we are in limbo, wait the first important move away from close range.  A rally in late May was a chance to act as this break, but rates have since returned to what were previously the lower limits of the range of 2014. As always, please keep in mind that rates discussed generally relates to what we have called 'best performance' (otherwise said, the most frequently cited, compliant, 30 year fixed rates for borrowers from high level, only on the price of pure and simple non-based, but also 'bang-for-the-buck.'  In General, our best execution rate tends to connote no departure or discount points - even if this may vary - and tends to predict the weekly Freddie Mac survey with great precision.  It is reasonable to assume that our rate of best-ex is the fastest and most accurate of the two due to the method of voting once per week from Freddie).  Coo, Mortgage News Daily / MBS living a former writer, Matthew began writing for Mortgage News Daily in 2007, covering a wide range of topics. Seeing a need in the marketplace, its focus shifted increasingly towards relating MBS and the broader financial markets for loan originators. ... more

MBS mid-day: with few things to look at, rates follow Stocks lower

Access to more precise indications in time real back months TBA Thomson Reuters and Tradeweb. More MBS mid-day: with little to monitor, rates follow lower Stocks

With no economic data major on the schedule and no titles change to respond to, bond markets were contained to follow stocks so far this morning.  Stocks are lower and the links are stronger.  There not much more to it than that.

This dynamic did not really begin until the national session.  Overnight trading was quiet as Japanese markets were closed for a holiday.  European trading was on the side of each side of the unchanged.  Stocks and bonds gives began to slide together just after 08.

MBS generally does a better job to follow the rhythm of the bills since Friday.  Fannie s 3.5 are the most relevant coupon rate sheets at the moment and they are in place nearly a quarter of a point on the day.

Priced below are delayed, note the timestamp at the bottom. Real time pricing is available via MBS Live.Pricing dated 21/07/14 11:35AMEST morning recalculate alerts and updates 10:47 : market bond Gains accelerate as Stocks Slide 09:01 : bond markets hold Gains by weekend as to intensify global Tensions Clayton Sandy : "spoke with more credit and they said this is transunion that reports all the lates." Says I need to update". Joon choi : "there is a surrogate of the PFS confirmed CR code" Clayton Sandy : "as someone has a bit of luck to get a reported short sale foreclosure update credit kind bed properly?" Discuss the MBS and mortgage markets on our dashboard streaming

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Mortgage Rates Appreciably Lower After Geopolitical Headlines

AppId is over the quota
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Mortgage rates moved more decisively lower today, though not for any stable or happy reasons.  Such is often the case with interest rates.  As economic conditions worsen or as terrible events around the world fuel demand for bonds, prices of those bonds rise, causing rates to drop.  This was the case today for US Treasuries as geopolitical events rocked markets.  Mortgage-backed-securities (the bonds most directly responsible for mortgage rates) tend to move in the same direction as Treasuries.  Today was no different, but with geopolitical headlines moving markets, Treasuries get more of the benefit because they're a more readily available "safe-haven" asset.

The events in question include the shooting down of a Malaysian airliner near the Ukraine/Russia border as well as the inception of an Israeli ground-based assault on Gaza.  There were other considerations in play today, but these were the biggest.  The net effect was strong and steady improvement in bond markets and several instances of mortgage lenders revising rate sheets lower during the day.  The gains leave 4.125% as the most prevalently-quoted conforming 30yr fixed rate for top tier scenarios.  The ability for rates to remain this low or move lower is limited only by the geopolitical strife to continue escalating.  Once it stagnates or improves, rates are likely to snap back higher.  Even then, we have yet to see a move outside the 2-month range.

Loan Originator Perspective

"The Malaysian Jet incident today created a bit of geopolitcal risk helping bonds and therefore mortgage rates improve today. On a technical basis we've moved nicely down to a floor in pricing but it appears we've been unable to break through this floor to prove this rally has more legs. Given that, I believe short term closings should stronglyconsider locking to reap the gains we've experienced. Folks with a longer term to closing can likely keep a floating with a cautious and attentive stance and a close connection to your loan officer." -Hugh W. Page, Sen. Mortgage Consultant, Capital Partners Mortgage

"FLOAT--Treasuries have moved towards 2014 lows, and Mortgages are trailing, slowly, behind. If treasuries simply hold these levels we'll see rates improve. As always, though, be ready to lock if momentum changes quickly." -Brent Borcherding, www.brentborcherding.com

"News of the Malaysian airliner being shot down over Ukraine has sparked a flight to safety trade where investors sell stocks in favor of bonds. The news helped push the benchmark 10 year note to the bottom of our recent range at 2.47 which has been very solid resistance. I have been saying the last few days to float the highs and lock the lows....however, we just received breaking news of a ground invasion of Gaza by Israel forces. This news has pushed the 10 year even lower. At this point, lenders will be very slow to pass along the improvements. Even though we are at the best levels in quite some time, I would recommend to float overnight to allow lenders additional time to pass along these improvements. " -Victor Burek, Open Mortgage

Today's Best-Execution Rates

30YR FIXED - 4.125
FHA/VA - 3.75%
15 YEAR FIXED -  3.375%
5 YEAR ARMS -  3.0-3.50% depending on the lender

Ongoing Lock/Float Considerations

The hallmark of 2014 so far has been a disconcertingly narrow range in rates.  Too many market participants bet on rates going higher in 2014, and markets have punished that imbalance with a paradoxical move lower. As of June, rates were officially lower year-over-year, but that's due to rates' path higher in 2013.  The current path in 2014 remains sideways.  European markets continue to play a nagging role in the background, generally helping rates in the US remain lower than they otherwise might be.  From a wider point of view, we're in limbo, waiting for the first significant move away from the narrow range.  A rally into late May stood a chance to act as this break, but rates have since returned to what were previously the lower limits of the 2014 range. As always, please keep in mind that the rates discussed generally refer to what we've termed 'best-execution' (that is, the most frequently quoted, conforming, 30yr fixed rate for top tier borrowers, based not only on the outright price, but also 'bang-for-the-buck.'  Generally speaking, our best-execution rate tends to connote no origination or discount points--though this can vary--and tends to predict Freddie Mac's weekly survey with high accuracy.  It's safe to assume that our best-ex rate is the more timely and accurate of the two due to Freddie's once-a-week polling method).  Chief Operating Officer, Mortgage News Daily / MBS Live A former originator, Matthew began writing for Mortgage News Daily in 2007, covering a wide range of topics. Seeing a need in the marketplace, his focus increasingly shifted toward relating MBS and broader financial markets for loan originators. ... more

Wall Street ends lower on anxiety on the misfortunes of the Portugal Bank

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Lower costs of slot ship are pulling towards the low fares, said Drewry

Greg Knowler, main editor of Asia | July 10, 2014 12:34 PM EDT

The unit cost advantage container carriers earn by mega - ships is having the effect of sliding towards the low freight rates in an era where all except the top lines are struggling to remain profitable.

Mortgage Rates Move Lower, Keeping Range Intact

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Mortgage rates improved today.  The bonds that most directly affect rates got a boost from stock market weakness and ongoing European bond market strength.  Today's drop in rates is significant in that it preserves a range that's been intact since early May. 

The range in question is small in terms of rates--stretching only from 4.125% to 4.25%.  Most of the day-to-day movement takes place in the form of closing costs (because lenders tend to offer rates in .125% increments).  So today's most prevalent rate quotes are the same as yesterday's (4.25%), but with slightly lower closing costs.  This drop in closing costs equates to 0.03% in terms of effective rate.

As has so frequently been the case in 2014, any time we're inside a narrow range, borrowers who are inclined to float have more justification in doing so, provided they're ready to lock if rates move back to the higher end of the range.  On a cautionary note, while rates have adhered to this range for 2 months now, the visits to the lowest levels have been progressively higher.  This could indicate that the longer-term momentum is pointing very slightly higher, and we'd need to see a move below late June lows to rule that out.

Loan Originator Perspective

"We are firmly at 4.25% but I still think floating in the short term may be worth it. Just make sure your Lender can lock quickly if it starts to move upward." -Chris Marconi Vice President First Midwest Bank

"With stocks weaker for a second day in a row mortgage rates improved again amidst a quiet week in most respects as far as economic data releases are considered. Recent moves have not taken us out of the persistent range we've been in which tends to support a locking bias for those with short term time horizons. For those with longer time frames, a floating stance with a keen eye to the markets and your loan officer on speed dial may be in order." -Hugh W. Page, Sen. Mortgage Consultant, Capital Partners Mortgage

"I have favored floating since last Wednesday for everyone that missed locking before the payrolls data. If you followed that advice, todays pricing is the best we have seen since Tuesday. Weak data out of Europe and continued issues around the world(Ukraine, Iraq and now Israel) have all contributed to the improvements we saw today. If your lender reprices for the better today, and you are within 15 days of funding, you should consider locking. I think everyone else should continue to float if you can tolerate the risk." -Victor Burek, Open Mortgage

"Nice gains today, as rates continued to return to July 1st's lower levels.. There may be further room for improvement in store, as treasuries have outgained MBS the last few days. As of mid day, 4 lenders repriced better, with more likely on the way. Short term, floating looks like the play. Longer term trends still TBD, stay tuned." -Ted Rood, Senior Mortgage Planner, tedroodteam.com

"The range appears to have found its support at the high end and floating the last 2 days, has paid small dividends. Tomorrow there is the 10 yr Treasury Auction and a good auction could lead to further gains. A good auction is no guarantee, but I think rates being near their highs for the last month should make it attractive. Floating continues to be a good option." -Brent Borcherding, www.brentborcherding.com

Today's Best-Execution Rates

30YR FIXED - 4.25%
FHA/VA - 3.75%
15 YEAR FIXED -  3.375%
5 YEAR ARMS -  3.0-3.50% depending on the lender

Ongoing Lock/Float Considerations

The hallmark of 2014 so far has been a disconcertingly narrow range in rates.  Too many market participants bet on rates going higher in 2014, and markets have punished that imbalance with a paradoxical move lower. As of June, rates were officially lower year-over-year, but that's due to rates' path higher in 2013.  The current path in 2014 remains sideways.  European markets continue to play a nagging role in the background, generally helping rates in the US remain lower than they otherwise might be.  From a wider point of view, we're in limbo, waiting for the first significant move away from the narrow range.  A rally into late May stood a chance to act as this break, but rates have since returned to what were previously the lower limits of the 2014 range. As always, please keep in mind that the rates discussed generally refer to what we've termed 'best-execution' (that is, the most frequently quoted, conforming, 30yr fixed rate for top tier borrowers, based not only on the outright price, but also 'bang-for-the-buck.'  Generally speaking, our best-execution rate tends to connote no origination or discount points--though this can vary--and tends to predict Freddie Mac's weekly survey with high accuracy.  It's safe to assume that our best-ex rate is the more timely and accurate of the two due to Freddie's once-a-week polling method).  Chief Operating Officer, Mortgage News Daily / MBS Live A former originator, Matthew began writing for Mortgage News Daily in 2007, covering a wide range of topics. Seeing a need in the marketplace, his focus increasingly shifted toward relating MBS and broader financial markets for loan originators. ... more

MBS mid-day: markets lower bond before the 10 yr/FOMC auctions; Registered results below MBS

Access to more precise indications in time real back months TBA Thomson Reuters and Tradeweb. More MBS mid-day: the bond markets lower before the 10 yr/FOMC auctions; Registered results below MBS

While MBS were composed of a portion of ground to the Bills for a few hours, they are generally underperforming this week.  Fannie s 3.5 are down by 5 ticks today from the Treasury bills are 3 ticks down in price.  Guilty is very probably the monthly report of speed of prepayment on Monday.  Traders MBS are generally major adjustments to these data within a few days after the report.  Therefore, we should begin to see underperformance bearing here.

A separate factor that should help the MBS from the Treasury bills is selling at auctions today and 30 years of the auction of 10 yr to come tomorrow.  Market participants trade generally yields higher than they might otherwise move in the auctions.  These "concessions" pre-auction can help facilitate a smoother auction process.  To use an analogy, if you know that you will soon need to do some heavy lifting (primary dealers must make an offer on the Treasury bills auctions), you can take a few deep breaths and avoid any heavy lifting in the period preceding your heavy task of lifting.

In addition to potentially help MBS the gap this morning, the concession of the auction also explains some of the general weakness of the bond markets. The rest of the weakness is a simple factor of yesterday "risk-stop" traffic flattened at midday.  Since midday yesterday, the bond markets have been in a fairly linear trend on the side, a little higher.  For all purposes useful, 10 yr yields simply returned to the technical level 2.57 important and will make their next decision based on the upcoming auction and the release of Minutes of FOMC following an hour later.

Priced below are delayed, note the timestamp at the bottom. Real time pricing is available via MBS Live.Pricing dated 14-07-09 12:08PMEST morning recalculate alerts and updates 09:49 : markets bond slightly more low during the night; Fighting to keep land Victor Burek : "it is not uncommon to be weaker in an auction of 10-year" Jason Anker : "after seeing a huge month and happy sense about me I bump into a friend who has closed 22 M in June. What a biz." Gus Floropoulos : "very interesting how the range was contained" Matthew Graham : "which connotes also taken benefit of Paris more short term that have been implemented on the last race at 2.66" Matthew Graham : "pretty steady bounce back from yesterday afternoon.". If you are looking for a map of 24 hours, there is a distinct trend away channel. Very likely, differential weakness has much to do with auctions 10 yr, positioning of the FOMC and modest rebound in the exchange of "risk-off" which went in the opposite direction yesterday. » Victor Burek : 'profit taking' Scott Valins : "the cause of this weakness of opening? '' Discuss the MBS and mortgage markets on our dashboard streaming

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UPDATE 2-Austrian lower house approves Hypo haircut law

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* Law forces losses on some junior creditors despite guarantees

* Needs to pass upper house as well, and be signed by president

* Former Hypo owner BayernLB faces 800 million euro hit (Adds details from parliamentary debate, context)

By Michael Shields and Angelika Gruber

VIENNA, July 8 (Reuters) - The lower house of Austria's parliament approved legislation on Tuesday that would wipe out the claims of some subordinated creditors of nationalised lender Hypo Alpe Adria, despite guarantees from its home province, entering uncharted territory for debt markets.

The government insists its move, which still needs the approval of the upper house and the president's signature, is a one-off step to ensure that Hypo's investors help to pay to wind down a bank that has cost 5.5 billion euros ($7.5 billion) in public aid so far.

The step is in line with European bank bail-in rules that take effect in 2016 that ensure taxpayers alone no longer shoulder the burden of propping up or killing off ailing banks.

But ratings agencies, senior bankers and the International Monetary Fund warn that Vienna has set a dangerous precedent, which may undermine confidence in other state guarantees that underpin billions of euros in debt.

"The situation with Hypo Alpe reflects badly on the Austrian banking system as a whole," said Dierk Brandenburg, a senior bank credit analyst at Fidelity.

"It creates uncertainty in the system, as investors will be thinking: 'If they can change the rules once like this, what's to stop them doing it again?'"

The law is likely to face legal challenges from investors including insurers and pension funds who hold the bonds.

Nevertheless, Austria sold 1 billion euros in bonds on Tuesday amid solid demand, including a 10-year deal at an average yield of 1.497 percent, which Finance Minister Michael Spindelegger said was a record low.

The coalition government has faced a public furore over the mounting costs of dismantling Hypo, which Austria had to nationalise in 2009 to avoid a collapse that would have sent a shock wave across the region.

NOT FAR ENOUGH

In Tuesday's debate, opposition parties complained the law did not go far enough to bail in Hypo investors. They said Austria should have let the bank go bust, an option that the government ruled out in March as too risky.

Letting Hypo go under would have bankrupted the province of Carinthia, whose unaffordable guarantees on Hypo's debt helped to fuel a decade of breakneck expansion at home and abroad that pushed the lender to the brink of insolvency.

Instead, Austria aims to impose losses on holders of around 890 million euros of Hypo debt guaranteed by Carinthia, and seize another 800 million from former Hypo owner BayernLB of Germany.

The legislation also sets up a "bad bank" that will absorb billions of euros' worth of Hypo assets to be wound down over years. The move will boost Austria's state debt to nearly 80 percent of gross domestic product, and nearly double the budget deficit to 2.7 percent of GDP this year.

Hypo is selling off its Balkan banking network under a break-up mandated by the European Commission. Spindelegger said a deal could wrap up within weeks.

Austrian President Heinz Fischer says the legislation needs a thorough legal review before he signs it.

Carinthia - which made millions by selling its Hypo stake to BayernLB - is fighting government demands that it contribute around 500 million euros to Hypo's costs. ($1 = 0.7331 Euros) (Additional reporting by Aimee Donnellan in London; Editing by Georgina Prodhan and Kevin Liffey)

Banks lead European shares lower as US fine concern hits Commerzbank

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* FTSEurofirst 300 and Euro STOXX 50 both fall 1.1 pct

* Commerzbank falls 5.3 pct on U.S. settlement fears

* Austrian banks hit by CEE exposure, investor haircut (Adds quote, detail, updates prices)

By Alistair Smout

EDINBURGH, July 8 (Reuters) - Banking stocks led European shares lower on Tuesday as German banks became the latest lenders to be negotiating a costly legal settlement with U.S. authorities.

At 1406 GMT, the pan-European FTSEurofirst 300 index was down 1.1 percent at 1,366.50 points, extending losses in afternoon trade in line with US stocks.

Euro zone banks fell 2.9 percent, the biggest sectoral faller, led lower by Commerzbank.

Shares in the German lender fell 5.3 percent as sources told Reuters that U.S. authorities had begun settlement talks with the bank and its larger rival Deutsche Bank, down 2 percent, over their dealings with countries blacklisted by the United States.

The New York Times reported that Commerzbank's settlement was expected to include at least $500 million in penalties. This compares to an almost $9 billion settlement struck by France's BNP Paribas in a similar case earlier this year.

"Stories about banks getting embroiled in regulatory investigations will be the new narrative for quite some time," Michael Hewson, chief market analyst at CMC Markets, said.

Mike Reuter, a broker at Tradition, said a fine of up to around one billion dollars would be accepted by the market.

"Unless they get a very big fine like BNP, I don't think it will suffer like the other banks (hit by U.S. investigations)," he said.

Austrian banks were also under pressure, with Erste Group down 3.5 percent and Raiffeisen Bank down 6 percent.

Erste was downgraded by Goldman Sachs, Citi and Deutsche Bank on Tuesday after last week's profit warning, and traders said that exposure to weakening markets in eastern Europe could hinder the country's banking sector.

New Hungarian legislation to compensate borrowers for unfavourable interest rates will require "material capital injections" from the foreign parents of banks operating the country, ratings agency Fitch said on Tuesday.

"The central and eastern European exposure of Austrian banks is a big issue. Raiffeisen in particular has a very large exposure there, and the economy in the region has problems," Mike Ingram, market analyst at BGC Partners, said.

"Banks generally have been struggling."

The lower house of the Austrian parliament also approved legislation to wipe out some subordinated creditors of nationalised bank Hypo Alpe Adria, in a move that ratings agencies said was a dangerous precedent.

The Euro STOXX 50 index was down 1.1 percent, at 3,194.99 points, taking its fall over the last three days to 3 percent and leaving the index at its lowest since late May.

The index has been marking higher lows since December but on Monday it broke below its 50-day moving average, in what is often considered a bearish technical signal.

"Our view on the Euro STOXX 50 is still bullish as prices remain above a strong ascending trend line drawn from December 2013 (currently at 3,080 points)," Philippe Delabarre, an analyst at Trading Central, said.

"Nevertheless, yesterday, the break below the 50-day simple moving average was the first weakness signal. Our targets remain 3,330 and 3,440 points as long as 3,080 is a support threshold."

Europe bourses in 2014: link.reuters.com/pap87v

Asset performance in 2014: link.reuters.com/gap87v

Today's European research round-up (Additional reporting by Francesco Canepa, editing by Louise Heavens)