Economic Summary: Last week in review (June 4 – 8,
2012)
US bonds (including mortgage bonds, to which
home loan rates are tied) are continuing to reach for some of the lowest levels
ever. Read on for details.
Last week, Fed Chairman Ben Bernanke did not comment on another round of Quantitative Easing (QE3). This put a pause on the stock market rally we saw midweek, to the benefit of the bond markets and home loan rates.
Also helping bonds and hurting stocks was a threat by credit rating firm Fitch, which said that the US may lose its AAA rating next year unless Congress comes up with a credible plan to significantly cut the budget deficit. Fitch also downgraded Spain three notches to BBB, which is just two notches above junk status.
The lack of confirmation of QE3, the US debt downgrade threat, and the escalating turmoil in Europe caused a "risk-off" trade, or flight to safety into the US dollar. This means US bonds are being purchased as a safe place to "park" money, and this is helping bonds and home loan rates reach their lowest levels ever. And while that’s great news for homebuyers, it is also important for our economy to strengthen and improve. Last week’s economic report calendar was light, though we did see a glimmer of good news as the latest weekly Initial Jobless Claims Report showed its first decline since April.
Last week, Fed Chairman Ben Bernanke did not comment on another round of Quantitative Easing (QE3). This put a pause on the stock market rally we saw midweek, to the benefit of the bond markets and home loan rates.
Also helping bonds and hurting stocks was a threat by credit rating firm Fitch, which said that the US may lose its AAA rating next year unless Congress comes up with a credible plan to significantly cut the budget deficit. Fitch also downgraded Spain three notches to BBB, which is just two notches above junk status.
The lack of confirmation of QE3, the US debt downgrade threat, and the escalating turmoil in Europe caused a "risk-off" trade, or flight to safety into the US dollar. This means US bonds are being purchased as a safe place to "park" money, and this is helping bonds and home loan rates reach their lowest levels ever. And while that’s great news for homebuyers, it is also important for our economy to strengthen and improve. Last week’s economic report calendar was light, though we did see a glimmer of good news as the latest weekly Initial Jobless Claims Report showed its first decline since April.
This information was provided by Mitch Canada of Bank of America - 866-861-0702
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