Phil Osborne here with the Wealth Center bond market update…
Surprise, surprise…the ISM Services (non-manufacturing) Report for January was released earlier than expected this morning due to a possible leak of information and the reading was ugly and well below expectations. Economists had expected ISM to be reported at 53.0, so when this early release showed a 44.6 reading, money immediately flowed out of the Stock market and into Bonds. The 44.6 reading suggests that the service sector is contracting for the first time in 58 months. The headline number of 44.6 is a new composite index to reflect changes in current measures of business activity, new orders, employment and supplier deliveries. It was well known that the manufacturing sector has slowed down, but the service sector had held up pretty well. While this is only one report, the markets are fearful that this could be a true sign of a recession.
Bad economic news is typically good news for Mortgage Bonds and this morning’s poor ISM was no exception and helped mortgage rates improve. The Bond is now once again sitting near the best levels since mid-2005. The Bond does have some technical resistance to battle which it has lost recently and has caused the bond to retreat several times so we will keep a close eye on that and keep you informed if mortgage bonds win that battle and break through to a whole new pricing level which could potentially bring interest rates into the mid to low 5’s in the near future. There is also the battle of inflation that is still waging but that is becoming less and less a concern as many inflation worries have subsided, however another fed cut which has been rumored today could fan the flames of inflation again and cause problems with mortgage rates.
We are in a very volatile time in history and a time when proper planning is essential for success and even survival. Many fear that economic woes will continue. We are definitely not a part of the “doom and gloom” crowd but we all must face our own financial reality, seek wisdom and gain a clear path for our futures. A part of this plan is debt management and mortgage planning which we specialize in, so don’t hesitate to contact us today for a free planning consultation.
