Stocks collapsed on Friday with oil dropping below $30 per barrel; China is entering a bear market and retail sales in the U.S. fell. This is some pretty scary news and U.S. bonds have benefited greatly with the 10-year U.S. Treasury bond yield dipping below 2%. Falling inflation and weaker global growth are weighing heavily on the markets this week. The market is not off to a good start in 2016.
On the interest rate front, the Federal Reserve is unlikely to raise rates four times this year as previously discussed. Mortgage bonds should continue to benefit from all of this uncertainty.
We remain cautious on where interest rates may go from here given where rates have gone the start of this year. However, clients will benefit on both purchases and refinances with sub 2% 10-year U.S. Treasury interest rates, and therefore we remain biased toward floating interest rates given the current volatile world market.