The U.S. Bond market traded in a tight sideways range, leaving home loan rates essentially at unchanged levels week over week. However, the technical picture reveals Bond market indecision as prices trade near the best levels of the year.
Why the indecision? The financial markets are bracing for a multitude of headline risk events in the upcoming week and traders are reluctant to place bets on the next market move in advance of the news.
The European Union continues to struggle economically. This past week Germany posted very weak economic numbers and manufacturing data, and as a result the European Central Bank said they are prepared to offer more stimulus to help their economies. The bad news in Europe pushed their Bond yields lower, and in turn helps push U.S. Bond yields and interest rates lower.
Here in the States, the U.S. remains the “cleanest shirt” in the laundry when compared to other global economies. This past week we saw strong Durable Goods Orders, which highlights the strength of the U.S. consumer, the shortest unemployment line in over 50 years, and strong corporate earnings reports.
Bottom line: the U.S. economy and housing market continues to bask in a Goldilocks situation – strong economy and labor market, high consumer confidence, low inflation, and low home loan rates. And if that were not enough, it is widely expected the Fed will cut rates for the first time in a decade – read on.
This coming week is shaping up to be a monster, literally, as the three-headed monster of the Core PCE, the Fed meeting, and the Jobs Report will be on the schedule.
In addition, the U.S./China trade talks will be ongoing, and these events could increase market volatility as well as determine the next directional move for stocks, bonds, and home loan rates.
The two-day Fed meeting will kick off on Tuesday and ends Wednesday at 2:00 p.m. ET with the release of the monetary policy statement. It is widely expected that the Fed will cut the benchmark short-term Feds Fund Rate by 25 basis points. Fed Chair Jerome Powell will hold a press conference immediately following the statement release at 2:30 p.m. ET.
Frankly, it is hard to overemphasize the importance of the upcoming week as it relates to the financial markets. People considering a home loan should be prepared to lock, should the bond market respond negatively to the week’s events.
Reports to watch:
- Economic data kicks off on Tuesday with the closely watched Core PCE, along with Personal Income and Spending, S&P Case-Shiller Home Price Index, Pending Home Sales and Consumer Confidence.
- On Wednesday, the first of two key labor market reports will be released in the ADP Private Payrolls Report, the inflation reading Employment Cost Index, and the Chicago PMI.
- Thursday brings the national ISM manufacturing Index and Weekly Initial Jobless Claims.
- On Friday, the July Jobs Report will be released which includes Non-Farm Payrolls, the Unemployment Rate, and Hourly Earnings. In addition, Consumer Sentiment will be delivered.