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By G. Steven Bray
Mortgage rates continue to be tied to oil prices and stocks. When they rise, rates rise. When they fall, rates fall. It’s not always that way, but this “flight to safety” trading has been active for the last few weeks.
As I’ve stated many times, interest rates are sensitive to expectations of inflation and growth. World equity and commodity markets are reacting to indications of slowing growth, and that has the punditry whispering recession. I read a wonderful quote the other day. “Did you know that the stock market has predicted 27 of the past 11 recessions?” I don’t know if a recession is imminent, but the fear is good for rates.
One other factor you may want to consider this week is the Federal Reserve meeting. This is the first meeting after it hiked short term rates in Dec. While no one expects the Fed to hike rates again this month, markets will be very interested in the post-meeting statement. The Fed previously indicated it would raise rates 4 times this year, but bond markets are only pricing in two rate hikes. Markets are watching to see if the recent stock and commodity market volatility will force more alignment between the two.