Bonds in the Dust

This week continued the bond market rally of last week, leaving bonds in the dust. The more people saw the shiny stock market, the more dull those bonds looked. When no one buys bonds they have to offer higher and higher prices to attract investors to the bonds. Pushing those mortgage back securities up up up.

Some data that didn’t help us (but was good news in the economy) was that weekly jobless claims were down 19,000, the CPI was up .4% and housing starts 25.5% and permits were up 0.3%

Add this news to the October retail sales number being up a strong 0.8% – the week normally would have been a bummer for fixed rates.

But with the election still fresh, and speculation on Trump’s cabinet and his effect on the economy, already Ford said they were canceling plan to move some production to Mexico keeping jobs in the rust belt.

The bond market had a very bad week. Rates went up from 3.25% last Monday the 7^th of November to 3.875% today November 17^th.

I anticipate that for a couple of days after the Fed raises the prime rate in December, rates will go down as they usually do, and then start climbing. Why do they do down? Because the fear of out-of-control inflation is subdued for a moment. The markets like that we have steady increases, not uncontrolled increases. So for a moment we have that…

The bottom line is that rates have returned to 2012 levels, are still historically low and values are high (equity in homes is high).  If you like a 3 something rate, now is the time to refi before 4 something is the new norm.

See chart below on what the average 30 year fixed rate was in January of every year since 1972 (source Freddie mac PMMS )  http://www.freddiemac.com/pmms/pmms_archives.htm

– this will give you perspective: