Last week Chairman of the Federal Reserve Ben Bernanke was silent on the possibility of another round of Quantitive Easing (QE3). This news slowed the Stock rally from midweek, in turn aiding Bond Markets and home loan rates. Remember, weak economic news causes money to flow out of Stocks and into Bonds, improving Bonds and home loan rates.
Another aid to Bonds was a threat by Credit Rating firm Fitch, who said the US could lose its AAA rating next year should Congress fail to come up with a plan to cut the budget deficit. Fitch went on to downgrade Spain to BBB, three steps below its former position and only two steps above junk status.
The lack of confirmation of another QE3, the threat of a downgrade by Fitch, and the continued drama coming out of Europe caused a risk-off trade into the US Dollar causing Bonds to be purchased as a safe place to “store” money. This in turn helps Bonds and home loan rates continue to reach their best levels which is great news for homebuyers. The important point to take away from the recent market news reports is that now continues to be an excellent time to purchase or refinance a home as home loan rates continue to remain near historic lows.
Next week the Retail Sales Report will be released on Wednesday, and should give investors a look into the current state of consumer spending. The Producer Price Index, or PPI, will also be coming this Wednesday and will provide Wall Street with a look at inflation at the wholesale level.
To end the week, the Initial Jobless Claims will be coming Thursday followed by the Consumer Sentiment report on Friday. The final news expected next week is the US Treasury’s move to sell $66 billion in notes and Bonds, potentially impacting Bonds and home loan rates.
Graph: Data source: Haver Analytics courtesy of www.bloomberg.com.