“It’s like watching paint dry.”
That was this past week as financial markets around the globe traded in a bit of a calm, sideways pattern ahead of arguably the most important economic event of 2019 — the US/China trade talks at the G20 meeting.
Depending on when you read this newsletter, the headlines may already be out as talks between President Trump and China’s President Xi are to take place on Saturday, June 29th.
The trade talks could have a major impact on global economies and even determine whether the Fed cuts rates, which at the moment is widely expected to happen in late July.
So, if you are looking to buy a home or potentially refinance an existing one, it’s hard to overstate the magnitude this event can have on rates for the foreseeable future.
At the moment we are watching the 10-Year Note yield hover near 2.00%, which has served as a psychological barrier preventing rates from moving lower. How the US/China talks go could very well determine which side of 2.00% the 10-Year Note trades.
Why is this important? Because if the 10-Year Note yield moves lower and beneath 2.00%, it will push mortgage bond prices higher and home loan rates lower still. The opposite is also true.
Bottom line: home loan rates are within .50% of the best rates ever and there is a very real chance we might see even lower rates in the very near future … like next week.
The upcoming week is holiday-shortened with the 4th of July on Thursday. The bond markets will close early on Wednesday at 2:00 p.m. ET and all US markets will be closed on the 4th for Independence Day. All US markets are open with normal trading hours on Friday.
This is typically a slow trading week, but not this time around. With US/China headlines coming over the weekend, there is no telling what could happen Monday morning in both stocks and bonds.
Moreover, with many traders away for the big vacation week, the low volume in financial markets could spark some exaggerated price movements — meaning rates can swing sharply.
And if that weren’t enough, come Friday the important Jobs Report will be delivered, which is likely the last meaningful economic report before the July Fed Meeting. This means if it is a stinker like the last three, you can count on a Fed rate cut at month’s end.
Reports to watch:
- The national ISM Manufacturing Index will be released on Monday followed by the ISM Service Index on Wednesday.
- ADP Private Payrolls will be delivered on Wednesday with Weekly Initial Jobless Claims on Thursday.
- On Friday, Non-Farm Payrolls, Hourly Earnings, the Average Workweek and the Unemployment Rate will be released.