The looming U.S. debt ceiling which threatens to shut down the government has caused Treasury yields and rates to increase.The 30- and 15-year fixed rate mortgages both increased by 7 basis points to 3.00% and 2.44% respectively.
Stocks fell at the beginning of the week as investors feared the possible ripple effects of Chinese real estate company Evergrande defaulting on its debt. However, experts predict this market correction will be a “shallow” one considering 1) how much cash is in circulation right now and 2) the need for consumers to either spend it now or invest it in a way that will allow them to keep up with inflation (i.e. in stocks). Also on many people’s minds is this week’s FOMC meeting, which began yesterday and will conclude later today. Most likely, the Fed will bring up tapering in November or December while emphasizing that this does not mean a rate hike in the near future. Their most recent “dot plot,” a graph of anonymous rate forecasts, reveals that seven out of 18 Federal Reserve members anticipate a hike by 2023 while four members see a rate hike as early as the end of next year. For the first time though, along with updated projections, we’ll also get forecasts for interest rates and inflation in 2024. As alway, these rate forecasts and Chairman Powell’s press conference post-FOMC meeting leave bonds and mortgage rates in a very volatile position.