Rate Update August 18, 2010

Mortgage rates suffered yesterday but are likely to rebound partially today.

After rallying yesterday on optimistic earnings and economic data stocks are taking a breather.  Stocks are being impacted by disappointing sales by retail giant Target.

As investors shift capital away from stocks for safer options bonds are benefiting.  The WSJ is reporting this morning that the US bond markets are experiencing strong demand out of Japan where investors are forecasting deflation (Japan suffered from deflation earlier in the decade).  Deflation would be a disaster for the economy but would drive yields even lower.  Click this link to understand how.

Tomorrow we get initial jobless claims which will likely impact the market.  For now I still believe the long-term trend is favorable even if rates are temporarily higher.

Current outlook: floating long-term