There was relatively little drama on the international stage this week as all sides in trade negotiations considered their strategies. The China stock market is down more than 20% this year, putting pressure on its leaders to work out a deal that will restore economic stability. Canada sells 75% of its exports to the US, providing ample incentive for a deal there also.
Consumer spending data showed strength in the most recent reporting period, suggesting continued strength in the US economy.
The yield on the much watched 10 year Treasury bond hit the important 3% figure at the end of the week. After having retreated from being above 3% several months ago to less than 2.8% many observers thought the trend of rising rates had paused, but maybe not! The yield curve continues to be very tight, with the yield on 2 year Treasury notes at 2.79% and the 30 year Treasury bond 3.13%. A flat yield curve has historically been the harbinger of recession, but there are certainly no other signs of that development in the near term. Core CPI edged down last month from 2.4% to 2.2%, possibly reflecting short term price movements in certain commodity sectors since the general trend in the last year has been upward.
In line with the tight yield curve, 30 year and 15 year mortgage rates are virtually identical, except for pure conforming loans ($453,100). Jumbo rates continue to be below even pure conforming rates, a reflection of the low cost of funds for buyers of jumbo loans.