Last Week in Review: No News is Good News
In the absence of any meaningful economic reports this past week, we watched bond prices rise while rates inched lower. Oh yeah!!!
Let us break down what is going on and look into this week as the boredom ends.
The Path of Least Resistance
Rates have been steadily improving over the past few weeks as consumer inflation fears have waned. With a nice trend in place and no news to knock bonds down, prices continued their path of least resistance: higher. How high? Mortgage-backed securities, which are where home loan rates are derived, closed at their highest level since March 2nd this past week, and the 10-year yield hovered near 1.55%, also the lowest in nearly two months.
FOMC Blackout Period
The Federal Open Market Committee (FOMC), which meets eight times per year to discuss economic conditions and determine whether to hike or lower the Fed Fund Rates, can always move the market when they speak or during interviews.
However, the FOMC has established a blackout period where FOMC members are to limit their public speaking and interviews. The current period is April 17 through 29th. When Fed members are not talking or sharing their views, the markets can't react to any perceived positive or negative statements. The quiet ends next week when the Fed delivers their Monetary Policy Statement on Wednesday at 2:00 p.m. ET. More on that below.
Bonds Regaining Some Shine
A couple of interesting trends happened this week which could bode well for rates in the near-to-intermediate term. First, stocks struggled a bit this past week, and when they dropped, rates also declined. This is a typical market reaction, but something we have not seen much of this year during the steady increase in rates. If stocks continue to stumble and we see a seasonal, "Sell in May and go away," reaction, it could leave room for further rate improvement.
Second, the 20-year bond auction this past week was well received. This means the buying appetite for Treasury securities was very good despite the recent improvement in rates/yields. If this trend continues, it will help keep long-term rates relatively low.
Housing en Fuego
March existing-home sales showed the median price rose by an annual record-breaking pace of 17.2%. This scorching rise is due mainly to an anemic 2.1 months of available inventory for sale.
Homes sold in 18 days on average, another record low.
This is all good news for someone selling a home, but as we know, it is rough for folks purchasing one.
With rates ticking back down, vaccinations administered, and economies reopening, we should expect continued strength in housing and hopefully more inventory available for sale.
Bottom line: This is an amazing moment to take advantage of the current interest rates as the present improvement in rates could be short-lived.
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