Housing market benefiting from low rates
Weekly bond commentary
It was a relatively quiet week in the financial markets, as if many were taking a well-deserved vacation.
Economic data was better than had been expected. Housing, especially, was far stronger, as both new and existing home sales in June rose by double-digits. The nearly 21% jump in existing home sales was the largest on record. But for context, because of the sharp drop in March through May, it still is 20% below February levels. Doubtless, the steady march lower in 30-year fixed-rate mortgage rates, currently around 3%, has boosted the housing market.
More timely surveys from the manufacturing sector point to further recovery. Preliminary July Kansas City and national surveys did point out that recent lockdowns due to surging Covid-19 cases raised the specter of faltering demand, but the national survey showed that service providers and manufacturers were more upbeat about activity in the coming year. A worrying note was the increase in weekly jobless claims, higher by 10%, to 1.4 million. The longer-term trend is toward lower continuing unemployment claims, but 16.2 million workers remain out of work—roughly 10% of the labor force.
Treasury yields were mostly unchanged this week from last, with the 2-year yield remaining at 0.15%, the 3-year yield rising 1 basis point to 0.17% and 5-year yields the same at 0.28%.