Happy Monday! Markets are bouncing around the flat line this morning. The Dow was in negative territory when I started this email. After a couple telephone call interruptions, the Dow turned positive by 40 points and then has come back to its current level of down 5 points. The NASDAQ is up 16 points and the S&P 500 is up 4. Commodities are lower with Gold prices down $12 an ounce and Oil prices are off 35 cents a barrel (WTI). All seems to be calm in the world this morning. The VIX is down 6%.
The yield on the 10 year Note has been the topic of discussion on many of the economic websites for the last several trading days. The yield is up another nearly 4 bps to it’s current level of 2.985%. We actually topped 2.99% earlier this morning. This is the highest level since January of 2014. What’s causing this recent rise seems to be a downward path on the back of support from central banks. The FOMC has kept interest rates artificially low now for about 10 years.
However, with stock markets on the rise and companies reporting strong earnings on the backs of recent corporate tax cuts, bond yields are allowed to rise to compensate. It will be interesting to see what happens when the yield hits 3% — it’s a psychological barrier for traders more than anything. However, the last time the 10 year Note yield hit 3%, in December of 2013, the yield consistently dropped over the next 13 months to 1.60%. Not likely that’s going to happen this time. Many bond analysts expect the yield to be between 3 and 3.5% at the end of this year.
Earnings season continues with the likes of Merck, Caterpillar and UBS reporting numbers that beat the street. Traders seem content today to keep things on the lite side. Glad to have a calm morning for the start to the week, haven’t seen much of that in the last several months. I’m in the office all day today. Please reach out to me by phone or email if I can help you out in any way. Have a terrific Monday and a very productive and profitable week ahead!
Kevin D. Stevenson | Vice President, Mortgage Division
Integrity Bank & Trust
13540 Meadowgrass Drive, # 205, Colorado Springs, CO 80921
P: 719.955.4801 | Direct: 719-955-4818 | C: 719.377.8151 | F: 719.960.2130