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By G. Steven Bray
The storyline hasn’t changed. European economies are struggling, and markets are anticipating new measures from the European Central Bank to try to stem the tide. As a result, European interest rates are flirting with all-time lows. Add to that the various global conflicts, and you have an effective block against rising US interest rates.
But of course, I’m assuming rates have a reason to rise. And they probably do. Recent Federal Reserve communications have hinted that it may raise the federal funds rate sooner than expected, and the US economy is showing some life. Both factors would tend to push rates up.
We’ll get a lot more economic data this week with the highlight being updated 2nd quarter GDP. While this is backward looking data, it could be relevant if it differs much from the initial report of 4% growth. But I still think any bond market reaction would be muted by the global factors cited earlier. On the other hand, next week is a jobs report week. That has a better chance of setting the direction of rates for the fall.
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