Stocks are lower this morning as oil gets roughed up. Bonds and MBS are up.
There is no economic data this morning, however the rest of the week looks pretty active, with retail sales, inflation data, housing starts, and industrial production. Of course we have the FOMC meeting Tuesday and Wednesday as well.
Mohammed El-Arian lays out his prediction for the FOMC meeting this week. Bottom line: No move in rates, and an emphasis on data-dependency. They will mention overseas weakness, but won’t make the statement that it will affect the US economy all that much. They will be sanguine on overall US data without becoming too hawkish on wages and inflation. So, generally a dovish take on things.
It is hard to come up with a good reason to take away the punch bowl when investor sentiment is hitting 2 year lows. Of course the ultimate poll is the market, and not some survey. Where are investors doing well these days? Rental properties.
Note that the recent increase in US rates was driven at least partially by increases in Euro rates. That move seems to be unwinding (in other words, Euro rates are heading back down). This will probably help guide US rates lower as well, especially if we get a dovish statement on Wednesday.
Morgan Stanley is out with a call saying yields are going lower. Their forecast: 1.45% 10 year by the end of September. While the US economy is doing ok, the rest of the world is not. They think the next rate hike will be in December.
Why is the first time homebuyer sitting out? Freddie Mac attributes at least some of the reason to misconceptions about buying, specifically credit scores and down payments. Many young borrowers still believe you need 20% down and perfect credit to qualify for a mortgage. Freddie has launched their Real Estate Professionals Resource Center to give pros the lowdown on products that can get a young borrower into a home.