Rates Rise on Strong June Employment Report
Interest rates moved higher on a strong June jobs report. The report caught some on Wall Street off-guard as the U.S. economy continues to improve in the face of the covid pandemic. However, the rising cases due to the Delta variant do present some challenges in the coming months. While mass shutdowns seem unlikely, anything can happen as the world struggles with this new more contagious variant. For the moment, Mr. Market appears to believe that the virus will not cause major economic harm (we sure hope so) and that the road to normalcy remains on track.
Hedge funds have gotten creamed trying to short the bond market. The dip in bonds last week is partially attributable to a large hedge fund covering a major short position. This depressed rates even further momentarily which made prompted concerns of something more ominous afoot. Rates have since risen from those low levels of last week and increased this week. We’re still a ways off from a 2.00% 10-year Treasury, but bonds seem to be headed modestly higher. Inflation readings in the U.S. and there is support abroad for the idea of some structural inflation, especially with wages. Persistent supply chain issues continue to push up delivery and logistic costs.
Housing seems to be slowing a bit as the end of summer approaches and the new school session approaches. Given the torrid pace of purchases over the last year and the prices increases, this comes as no surprise. Lenders remain eager and willing to lend. There are now a myriad of ways to qualify borrowers beyond traditional banks. This bodes well for the broker business, especially in California, where we have a large group of borrowers who don’t fit into traditional lending products.
