Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.
"THE WORLD IS BUT A PERPETUAL SEE-SAW." Michel de Montaigne. And that sentiment was especially true in the world of Stocks and Bonds last week, as money see-sawed back and forth between the two markets, halting the improvement that Bonds and home loan rates mustered up in the first part of the week.
Bonds and home loan rates began the week looking good - and remembering that inflation is bad news for both Bonds and rates, they were helped along by good news on the inflation front. Inflation at the wholesale or producer level remained tame in May, and at a consumer level, inflation readings came in lower than expected, with a year-over-year reading at its lowest level since 1950. These are good signs that inflation hasn't become an issue yet. However, inflation will be a concern down the road, due to the massive stimulus being injected into the economy. It is said that rates are like a boat floating atop the sea of inflation...as inflation rises, so will home loan rates. If you or someone you know should be acting on today's still low home loan rates, please get in touch soon.
Also helping Bonds rally in the early part of last week was the fact that the New York State manufacturing index came in weaker than estimates, indicating that the US economy is still very weak. And since bad economic news often causes money to flow from Stocks into Bonds, this piece of news helped Bonds start the week on an improving trend.
However, Bonds and home loan rates reversed course midweek and worsened, as money see-sawed back over to Stocks. They were also pressured to worsen by the enormous amount of Bond supply hitting the markets - as too much supply of anything will naturally cause the price to move lower...and in this case, has caused home loan rates to move higher. Posted from the Mortgage Market Guide
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