Mortgage rates are improving every day, the treasury markets are having the biggest really since 2008!? Why?? Actions by President Trump and the Tarrifs that are being implemented. Fed funds futures contracts extended their rally and are now indicating more than half a percentage point of interest-rate cuts this year by the U.S. central bank.
The yield on two-year Treasuries is headed for the biggest two-day decline since January 2008 after China extended retaliatory tariffs to cover more than two-thirds of imports from the U.S, with Beijing also warning students about the risk of studying in America. Meanwhile, JPMorgan Chase & Co. slashed its targets for U.S. yields on concern that the trade war with will crimp economic growth and force the Federal Reserve to cut interest rates.
While the effective fed funds rate is at 2.39%, the rate implied for the end of 2019 by the January futures contract dropped 15 basis points on Friday to 1.855%. Central bank shifts are often done in increments of 25 basis points, and current pricing implies two cuts of that size by the end of 2019.
The shift comes amid a worldwide rally in bonds after U.S. President Donald Trump announced his plan to levy tariffs on imports from Mexico, adding further fuel to concerns about global trade tensions. Strategists at several U.S. primary dealers have also changed their forecasts to predict cuts this year from the Federal Reserve.
“Even if a deal is quickly reached with Mexico, which seems plausible, the damage to business confidence could be lasting, with consequences that might still require a Fed response,’’ JPMorgan Chase & Co. chief U.S. economist Michael Feroli said in a note to clients on Friday.
This information was provided by Bloomberg.com