This report is credited to an update from Loan Rate Guru, Barry Habib of MBS Highway.
First, Fed is going to slow down their purchases of bonds and treasury bills. This goes along with a strategy that the current administration is employing and as one of the largest buyers this will open the supply channel.
Second, S&P is poised to rise. This might be good news for your stock portfolio but bond yields are inversely tied to stocks because investors will seek to gain the highest returns for their investments. If they can get better returns with equity purchases they will purchase less bonds and treasury notes.
Third, the PCE indicator is about to rise. This is the Personal Consumption Expenditure and a measure of inflation. If inflation rises that means you have less dollars to purchase. This indicator is a rolling 12 month average and March, 2017 was abnormally low and that month will fall off on the next report. This will likely push the CPE from 1.5% to 2%.
Historically rates remain low but expect increases in the near future.
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