Bad news is good news for the U.S. Bond market and mortgage rates. This past week, bad news by way of worse than expected economic numbers in Europe cast a dark shadow on the financial markets. As a result, U.S. home loan rates ticked down to the best levels in ten months.
The U.S. economy is the "cleanest shirt in the dirty laundry" when compared to other global economies -- meaning our economy is performing pretty well, while countries like Germany are on the brink of recession.
How do problems in Europe help our rates? With their economies materially slowing, their Central Bank, the ECB, will not be raising rates anytime soon -- possibly not for another year or more. This means their rates will stay low for longer. And when rates around the globe move lower it drags U.S. rates lower as well.
The chance of a Fed rate hike in 2019 is looking more unlikely every day and this fresh round of weak economic data from Europe helps the Fed's case for no hikes in 2019.
In the absence of a surprise uptick in economic growth and inflation, we should expect home loan rates to remain near current levels for 2019 and possibly beyond.
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