Monday, May 8, 2017

What's going on and why does it matter?

Global bond markets are holding up quite well after the pro-Euro Emannuel Macron won the French Presidency in yesterday's election. It seems like the financial markets may have already priced in a Macron victory. 

Investors' attention is now turning back to the US, with the Fed, Trump economic policies and domestic economic reports back in focus. There are a few Fed policymakers who are scheduled to give speeches today, and the market will be looking for more details on the Fed's monetary policy outlook.  The Fed kept short term interest rates steady last week, but they paved the way for a June rate hike and seemed to indicate that their 9-year bond buying program may be coming to an end later this year.  The market is also watching political developments in Washington to see if the new health bill and tax plan have a chance of passing the Senate.

Although the economic calendar is light today, the market will be digesting wholesale inflation (PPI) numbers on Thursday, as well as the consumer inflation (CPI) and retail sales numbers on Friday. The Fed is scheduled to purchase a sizable $2.125 billion of 15-year and 30-year conventional mortgage bonds today. It appears that mortgage bonds may trade in a range between their 30-day and 100-day moving averages until a clear direction is established.

What should you do about it?

Lock your rate to be safe.

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