Market Commentary 2/8/19

Global yields continue to move lower benefitting borrowers in a significant way.  Domestically, the so-called “Powell Put” has helped equities rise as traders have greater confidence in bidding on riskier investments.

The 10-year Treasury is trading under 2.65% which is making mortgage rates ultra attractive again and from what we can see, increased loan volume greatly.  While our domestic rates are low, rates are even lower across the pond. In fact, there are hints that the European Central Bank might soon lower short rates in the face of a slowing European economy, Brexit confusion, and looming Italian debt concerns.  Add a deflationary Japan and a slowing China economy to the mix, and therein lies the reason our domestic rates while low are actually quite high in relation to the rest of the developed world.

No big economic news this week, but next week will be important with multiple inflation reports coming out.  If inflation remains tame, we could see rates move lower.  Should we get a surprise higher on inflation, rates will adjust quickly.  The Fed calmed markets late last month as they confirmed rates increases and the Fed balance sheet reduction was not on auto-pilot. A hot inflation reading could challenge those statements, especially with a booming U.S. economy, and historically low unemployment.

Home buyers are taking advantage of these low rates, and with a drop in home prices, we are seeing greater activity from buyers.  We remain biased toward locking-in rates at these low levels (to be fair, levels we thought we would not revisit again for quite some time).