28 Aug Treasuries within Striking Distance of All-Time Low Yields
The 10-Year Treasury Note yield has fallen to the 1.45% level, which is now within striking distance of the lowest levels we have ever seen in the history of the US treasury market. This is exceptionally interesting to have this happen at a point when most economists were expecting to reach levels north of 3.5%. Further, it is at a time when employment levels are strong, consumer spending is high, home values are appreciating, and stock prices were recently at all time high levels. What does this mean? Well, if you ask me, it’s a sign or what’s to come. Generally, the bond market is a more reliable indicator of the future economy than the US stock market is. Bond investors are clearly anticipating a recession. As a result, more economists are now coming to the same conclusion. What does this mean for mortgage interest rates? Lower rates ahead.
Stocks are starting the day lower and appear poised to once again test the floor of support. If this floor holds, losses in the stock market will be limited. However, if this floor breaks, we will see stocks take a much stronger drop. Since a break below this would be an exception and not the rule, investors should be ok. I do believe this level will break in the near term. When that does happen, mortgage bonds should be the beneficiary.
There remains little benefit or loss to float. If bonds remain in the tight trading range, not much will happen.