Weekly Economic Update: April 22nd, 2019
• The two-year Treasury note declined one basis point last week from 2.40% to 2.39%. Thirty-year mortgage rates bounced five basis points to 4.17% and are just off their recent lows of 4%. Thirty-year mortgage rates are down from 5% in late 2018 and should help stimulate future home purchases.
• The S&P 500 has now recovered almost all of its losses from late 2018 which will help alleviate concerns about the loss of 4 trillion dollars of market wealth in Q4 2018. The Treasury curve between 3-month Treasury bills and ten-year Treasury notes have moved back to a positive yield pickup of 16 basis points which should lessen the concern for a pending recession.
• Wages have continued to firm up, and consumer confidence has elevated. There is no sign of inflation accelerating anytime soon above the Fed’s 2% Core PCE target. The economy seems to be shifting into a soft landing mode from a crash mode, and interest rates are firming slightly.
• The Fed should continue to be on hold for the foreseeable future, and the two-year note should rise above the 2.5% Fed funds level as investors unwind their expectations of a Fed ease happening anytime soon.