Daily changes in the 10 years have been swinging up and down in groups of days. The market is trying to find direction. With robust new jobs and CPI up this past week, it all but assures that the Fed will raise rates at their next meeting on July 27. The debate now is by how much: 75 bps vs 100 bps.
Air fares saw a decline falling 1.8% in June and the meat, poultry, fish and eggs category also dropped .4% for the month. Gasoline prices have come down from their June peak with a gallon of regular falling to $4.64, a 4.7% drop for the month.
Short-term 1-month rates have rocketed up 44 bps this past week based on expectations that the Fed will increase rates. Even with the rapid rise in short-term rates, the short-term portion of the Yield Curve remains steep. Longer-term portions of the Yield Curve are inverted pointing to recession concerns regarding the combination of Inflation + High-Interest Rates = Stagflation.
10 Year US Treasury
Daily changes in the US 10 Year Treasury rates are represented by the blue bars while the red line is the 14-day cumulative change in rates – a 14 bps decrease. Note the up & down in rates which is indicative of an uncertain market. For the blue bars, it is unusual to have changes of greater than 0.10 in a single day.
2022 Recent Yield Curve Changes
In the past 2 weeks, 1 month rates have increased from 1.12% to 1.99%—-A Big Increase.
The Yield Curve for short terms is VERY steep while the longer term (5+ years) are inverted. Could we be in for a short term period of stagflation?
Key Econ Items in the upcoming week that could impact Treasury and Mortgage Rates:
- New Home starts
- Existing home sales, prices, and months of inventory
- Business Leading Indicators
New Homes Supply For Sale and New Home Starts
New home starts have leveled off and turned down with the 30-year mortgage rate run-up that occurred starting in March 2022. Note Months of Inventory are high. Millennials have pulled back on NEW home purchases when mortgage rates exceed the key price point level of 5.00%. But potential home buyers shouldn’t let headlines scare them. Homebuyers monthly payments would not be up by very much. It’s a great time to reevaluate and decide what features are really needed in a future home.
Existing Home Sales and Prices
Existing home sales are in a downward trend that is caused by both rising mortgage rates, higher prices, and a lack of homes for sale.
Existing Homes Supply For Sale and Pending Sale Index
Existing home months of inventory are rising but remain at a historically low level. The fact it is increasing at this time of year is a concern. Pending sales have been in a free fall—homes can’t be sold when homes are not being put on the market.
Economic Release Dates For period ending: 7/14/22
Bill Knudson – Research Analyst for Landco ARESC