Declining mortgage rates have spurred refinance activity, as well as increased the probability of a strong spring home buying season. With inflation in check and the Fed on pause, interest rates should remain attractive for the foreseeable future. However be on the alert as rates may have bottomed and hit resistance in moving lower after rallying greatly since the beginning of the year.
Fears of global economic activity slowing continue to weigh on bonds. The recent drop in rates has pushed several wealthy nations debt to trade at zero % or below. In the U.S., the 10-year Treasury bond briefly dropped below 2.4% this week and the 3 month to 10-year Treasury yields inverted, a potential ominous signal of a looming recession should the inversion hold. An inverting yield curve has predicted most recessions and the inversion is the result of fears of economic growth globally as well as a lack of inflation. These fears will keep investors on their toes and may create a more volatile rate environment in the coming months.
Given that we believe most of the concerns we’ve mentioned are priced in, we are biased toward locking in rates at these very attractive levels. Any unexpected good news could move rates up higher quickly.