Aug 252015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Despite the wild ride for equity markets over the last week, bond markets have moved relatively little. Usually when markets melt down, you see investors flock to the safety of bonds, pushing rates down, but not so much this time. I’ve seen lots of theories that try to explain why this time is different.

One theory says that markets still are expecting the Fed to raise short-term interest rates in Sep, and this is keeping pressure on rates. I’m not sure I buy this one given that the recent equity market chaos may have taken a Sep rate hike off the table.

Another says the US economy still shows relative strength. The drama has originated overseas, particularly with China. These theorists say it’s not clear that a Chinese collapse would drag down the US economy. I think this theory has some merit. While US economic growth isn’t stellar, it’s the best horse at the glue factory. This leaves the bulls in control of market movement, at least for now, and that means there’s a risk of rates bouncing back.

For those wanting still lower rates, I think we’re going to need continued market turmoil abroad before the bears take control at home. That’s certainly possible, but it’s also unpredictable.

Sorry, the comment form is closed at this time.