In case you thought the worst was behind us last week with regard to rates moving higher the increase continues here on Monday morning. Mortgage rates and US Treasury yields have now increased by a full 1% since the beginning of May. This marks the sharpest increase in interest rates inside such a short period of time in over 50 years!
The markets continue to digest the comments made by Fed Chariman Ben Bernanke last week when he effectively laid out a timeline for winding down quantitative easing (QE) by mid-2014. Without the Fed’s monetary support investors are shedding US Treasury & Mortgage-backed bonds (MBS’s) which lose value as rates rise.
The economic calendar starts tomorrow when we get the latest Case-Shiller home price index and consumer confidence. Wednesday and Thursday also bring significant economic data. To make matters even more challenging for interest rates the US Treasury is set to auction $99 billion of fresh debt this week. It will be interesting to track demand for these auctions given that the yields have risen sharply since the last issuance. Strong demand in these auctions could help rates stabilize.
Current Outlook: lock, lock, lock, then lock again