U.S. bonds benefited across the board as the result of a horrible week for the world stock markets. In the U.S., the Dow Jones Industrial Average is down big for the week (over 700 points for the week as of Friday morning). There are several factors that are pressuring stocks: the Chinese economic slow-down, on-going problems in Europe, poor corporate earnings in the U.S., and the precipitous drop in oil and other commodities over the last several months.
U.S. bonds have benefited from the negativity surrounding the global stock market this week with the U.S. 10-year Treasury at 2.05%. Also, the much discussed September rate hike may be getting pushed back to December or beyond as suggested by the release of the Federal Open Market Committee (FOMC) meeting minutes. Some experts are saying that the Federal Reserve waited too long to “lift off short term rates from near zero” and that now with so many other foreign central banks devaluing their currencies and providing their own Quantitative Easing (QE) stimulus programs, the Federal Reserve is stuck. We can only wait and see what will happen at the September Fed meeting.
In the interim, we continue to remain biased toward locking in rates at these lower levels on a case by case basis.