Market Snapshot September 9, 2019
Good Monday A.M.,
There is no economic data out today and with no additional insight on the trade talks, equity markets continue to be hopeful. Bonds are being pushed around a bit which has more to do with a reset of expectation on what the Fed may do in December, and not next week. Markets have fully priced in a .25% rate reduction at next week’s FOMC meeting. The Fed is in a typical black out period where they will be quiet before next week’s meeting so we won’t hear any additional insight from the insiders. The ECB is meeting this week and we will hear its decision on how aggressive/accommodative/stimulating it will be to try and put the EU back on track from its negative growth. That Brexit is likely to be delayed again and now beyond October, may allow the ECB to be a little less aggressive than expected and hoped. This would not be not good for bonds and rates. If Brexit were to just go away, that would likely change the tide in Europe and a rising tide lifts all boats (and rates would jump .25% – .5%). And with that, the US 10-year yield 6 bps higher at 1.62%. Just 10 days ago, that yield was 1.44%. Things can move quickly. Just for context, during the same time-frame, the German 10-yr Bund had a yield as low as -.72% and is now -.58. I think we are close to the top of where Treasuries will hang out before next week’s Fed meeting. Or at least I hope. If not and we continue to weaken, the next stop on the 10-yr Treasury train could be 1.80%. Keeping all of this in context is important and recognize that mortgage rates are lowest since October 2016. That said, pricing will worsen if the Fed does not lower the fund rate, trade agreement with China is reached, good U.S economic data or other central banks reduce global recession fears.
A lot to process for a Monday AM.
Make today great!