Rate update: What will break the current range?

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By G. Steven Bray

Last Friday’s economic data was scary enough to push rates down to 1-month lows, but that’s just the bottom of the same range they been riding for the last few months. The problem is the economic data is conflicting. Jobs and housing to a large degree seem healthy, but spending and investment are anemic, and inflation is quite low despite all the Fed’s stimulus actions. In this environment, rates lack motivation to move one way or the other. That said, we could be just one big data point away from a move that escapes the range.

That seems unlikely this week. The most significant economic event is the release of the Fed meeting minutes. I don’t expect the minutes will contain any surprises, but it’s always possible market analysts will parse some phrase to suggest the Fed’s future course of action.

At some point the range will be broken, even if only temporarily. Given our closeness to all-time lows, and given the strength of the job market, a break higher seems more likely than a break lower. Locking when rates are at the bottom of the current range is a logical choice. If you choose to float, choose a bail-out point. If rates start to move up, you could lose ground quickly.