The only good thing happening in the bond market is the 10 Year Treasury Note yield hitting a critical level that has held several times over the past four years. The bad news is that if this level fails to hold, we will see bond prices move down to the next support level. This will of course drive interest rates to multi-year highs. The level of 2.635% on the 10 YTN will likely soon be at 3.04% as rates trend higher in the coming days, weeks or months. This is not good news at all for home buyers who are looking to make a move as the summer months approach us. Higher rates will reduce the amount a homebuyer will qualify for, or will just make a home more expensive to own.
With the temporary government funding running out at midnight tonight, Republicans and Democrats are scrambling to come up with an agreement before a shutdown occurs. Democrats are demanding a provision that permanently stops deportation of some undocumented immigrants. However, Republicans want to keep that issue separate from funding and budget negotiations. President Trump has a meeting scheduled today with Senate Democratic Leader Chuck Shumer to negotiate an agreement. As the odds of a shutdown grow increasingly higher, both parties are publicly attacking the other for allowing this to happen. Although an agreement will in fact happen, it may not be in time to avoid a temporary shutdown. This could end up ultimately providing paid vacations for thousands of Federal employees, as we know back pay will ultimately be offered.
Although the odds may favor bonds holding at current levels, the risk of floating is very high. Bonds are in a deep downward channel that may push rates to multi-year highs. For those who are opposed to taking risks, the safe play remains to lock.