Market Update: Bond markets maintain momentum with Fed rate announcement looming
Bond markets hold steady
The bond markets are holding on to gains from a week ago, when the big news was the yield curve inversion in 2s/5s. This simply means the yield on the 2-year treasury note was higher than the yield on the 5-year treasury note; typically, yields on bonds with longer terms are higher. An inverted yield curve is often associated with an economy about to enter a recession.
Federal Reserve rate announcement takes center stage
This week the economic calendar is quiet, aside from the Federal Reserve rate announcement on Wednesday. It’s highly unlikely that the Fed will move rates at this meeting, but with little else happening, traders will likely overact to any clues the Fed offers on its next policy shift. The yield on the 10-year is once again under 2.60% and mortgage rates continue to head lower, with the exception being intermediate ARM rates that continue to struggle because of the combination of low origination volumes, low liquidity and the ever-flattening yield curve. In most cases, better value can be found in the 30-year mortgage space.
Jeremy Collett is Guaranteed Rate’s Executive Director of Capital Markets. Market Updates are designed to provide readers with a high-level yet insightful view of how economic news, events and trends affect mortgage rates and the homebuying process.