Bonds lose ground (but could’ve lost more)

Rates moved back in the opposite direction after a robust job and wage growth report came out last Friday. The 30-year fixed rate mortgage is up 5 basis points to 5.35%. Meanwhile, the 15-year was more impacted with a 19 basis point spike to 4.79%.

current outlook:

As mentioned above, the U.S. job market is staying strong. Additionally, a recent survey published by the NY Fed shows that fewer consumers expect inflation to drag on for another 1-3 years. Only 6.2% of consumers expect inflation to go on for another year and only 3.2% believe it will last another three. What this means is that the odds of the Fed hiking rates by 75 basis points again at their September meeting just doubled. Also of note is a sharp deceleration in home prices. June’s data revealed the annual pace falling to 17.3%, the sharpest drop since Black Knight’s records began in the 1970s. However, this is still well above normal appreciation and could be a sign of the market returning to normal after many months of record-breaking price growth. To put it in perspective, housing price appreciation didn’t go above 15% during the mid 2000s real estate boom.

Bonds lose ground (but could’ve lost more)

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