Good Tuesday AM,

Bonds are hitting a pause after several days of gains. The 10-yr pushed back up a few basis points from yesterday’s low of 1.15 to sit at 1.17/1.18 today. Mortgage bonds are off about 9bps. There is nothing to worry about here, just a pause. I suspect we will see lots of sideways movement until Friday’s jobs report. Not that I expect much from the report, but it is billed as the biggest report of the month and does typically create some volatility. With the Fed buying as many bonds as it can find with no end in sight (at least over the next several months) to US bond yields being substantially higher than most other advanced economies, whether you feel that the economy is healing or not, the demand for bonds will continue to outweigh the supply which will push rates lower. There is, as we saw last year, a limit to how low they can go, but we do have a little ways to go. But alas, if this were only so easy to predict…  The fly in the ointment is that there is a possibility institutional bond buyers begin selling or shorting bonds over our careless government for not solving the debt ceiling issue. I mean the government lives off of borrowed money and we cannot borrow money now that we have blown through the debt ceiling. The treasury is now taking immediate and drastic steps to conserve cash. This could lead to layoffs at the Fed level. Worse, we could see our US bonds downgraded by the rating agencies! If this happens, we will indeed see bonds sold and likely sold heavily.

Love this little nugget… Redfin has reported that the median sale price of U.S. luxury homes jumped 25.8% year-over-year in Q2, while the median sale price of the country’s most affordable homes rose 18.7%. By comparison, prices of mid-priced and affordable homes grew just 16% and 13.2%, respectively. Purchases of luxury homes in the U.S. surged 88.2% year-over-year in Q2, while purchases of the most affordable homes rose 56.8%. By comparison, purchases of homes in other price tiers increased between 30% and 45%.

Please remain safe and healthy, make today great!