The Fed cut its interest rate, but mortgage costs went higher
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Bond investors could not get the guarantee they are looking for, flying against the interest rate deduction of the Federal Reserve, long -term treasury returns this week splashed.
. 10 -year treasury The yield increased by 4,145% after falling below 4% this week. . 30 -year Treasury Yield – It was closely monitored for connection to home mortgages – at the beginning of the week, 4.604% was traded at a level of 4.76%.
10 -year Treasury return, 1 month
The FED reduced the comparison lending rate to 4.00-4.25% at the end of the Wednesday meeting to 4.00-4.25% and asked investors to send shares to break the record because they cheered the first rate of the year. However, according to the Chief Investment Officer Peter Boockvar, at some point of BFG Wealth Partners, bond traders saw this movement as an opportunity to “sell the news” after their last bond gains.
Boxvar, longer bond traders dated long -term “FED does not want to reduce interest rates,” he said.
Long -term bond sales reduced the price and increased the yield. Prices and returns for bonds move in the opposite direction.
BOCKKVAR, inflation is over 2% target of the FED and the economy looks stable at a time to alleviate monetary policy, the Central Bank “eye to the forefront” may show, Bocckvar, said a long -term risk of securities is a key risk, he said. The Fed’s economic projections, published on Wednesday, showed that policy makers see a little faster inflation next year.
30 -year Treasury return, 1 month
Investors are looking for the Fed to direct the emphasis on inflation to the struggle against inflation after weak employment data at the beginning of this month to direct the labor market to increase inflation. FED President Jerome Powell pointed out the labor market that softened the rate of Wednesday and cut the “Risk Management” movement.
“Bond Market, if [longer yields] High continued, ‘3%stuck inflation and interest rates in an aggressive way we do not think you should reduce,’ ‘he said.
In addition, Boockvar said that higher yields this week, longer -dated bond prices have been brought stable in recent months after increasing and lower returns, he said. Authorized, the Fed was seen after the ratio of the ratio in September last year was a similar movement, he said.
10 -year Treasury return, 6 months
But since then, Boxvar said that despite the FED cutting rates, it is noteworthy that the 10 -year grade efficiency has changed very little compared to the beginning of 2024.
An increase in longer -term returns may have effects on mortgage loans and credit card costs in large ticket purchases such as homes and cars. After reaching the lowest level of three years from the Central Bank action, mortgage rates increased this week.
Homemade Lennar On Thursday, he missed Wall Street’s revenue expectations for the third quarter and gave weak guidance for delivery in the existing quarter. A joint CEO Stuart Miller said in a statement that Miami -based Lennar faced “continuous pressures” in today’s housing market and “high” interest rates for a large part of the third quarter.
I’m looking for ‘terrible news’
According to FWDBONDS Chief economist Chris Rupkey, the stock market can act significantly in a ratio deduction, but bond investors are trying to make decisions as they see as a larger picture.
“This is not the journey, the target,” he said. This can be determined in part by looking at the estimates of the Central Bank for future ratio interruptions and the neutral rates on the ratio of FED funds.
Rupkey, “They are trying to evaluate: What is the last game?” He said. “The bond market will really react after making sure that the central bank will significantly reduce rates.”
A Point Boocckvar said that long -term US yields may also be affected by international colleagues who tend to move higher and make the key to following the overseas economic developments and movements of foreign central banks.
Nevertheless, he said that investors should pay attention to what they want in the case of long -term efficiency.
Economist said that the decreases of yield often indicate a stagnation on the horizon. In fact, Rupkey has applied to unemployment this week’s yield splashes, partly, which has recently shown less an economic decline.
“Don’t be too happy to reduce bond returns, because it may mean that it is impossible to find a job.” He said.
“Unfortunately, the bond market only embraces the bad news.” And unfortunately, “Not just bad news … Terrible news.”
– Fred Imbert and Diana Olick of CNBC contributed to this report.
