Is the term "blood bath" over-used and lost its impact? "It's a blood bath," said a VP at PIMCO about the
current market conditions. Yes, rates have crept up. Yes, property values have gone down in some over-inflated,
speculative areas of the nation, and the national median home price may have its first annual decline since the
1930's. Yes, some portions of the economy are slower than others: confidence among homebuilders fell in June
to the lowest since February 1991, according to the National Association of Home Builders/Wells Fargo index. But
overall consumer confidence is stable, rates are still low by historical standards, and property values in many
parts of the US are constant or rising.
Speaking of which, in a move that surprised no one and didn't move the markets too much yesterday, the
Federal Open Market Committee (FOMC) decided to keep its target for the federal funds rate at 5.25%.
Economic growth is "moderate", despite the housing market, and the Fed feels that the economy seems likely to
continue to expand at a moderate pace. So, growth is rebounding after a slowdown earlier in the year, while
inflation has eased from its level in February, which matched a four-year high, and rates are on hold. We started
off with a 10-yr yielding 5.09% this morning, and after Personal Income (+.4%) and Personal Consumption
(+.5%) were released, it went to 5.07%. Mortgage prices are a touch better. Ahead of us we still have the
Chicago Purchasing Manager's survey, Construction Spending, and the Michigan Consumer Sentiment survey.