Unlike last week, markets have a number of key economic measurements: March housing starts and permits; the April NAHB housing market index; March industrial production and factory use; the Philly Fed business index; and the Fed will release its Beige Book. The Book is the staff report on the economy from each of the 12 Fed districts and is used by the FOMC when it meets on May 1st.
Over the weekend, more rumblings from North Korea refusing to enter discussions with the US on ending its nuclear bomb development. Tensions between the US, South Korea and North Korea remain at high levels, although most intelligence reports indicate the country does not yet have enough weapons grade plutonium to develop a bomb that could reach the US, but does have a small nuke missile that could reach Guam.
Meanwhile, although there is reason to be concerned about North Korea’s belligerence, global markets are not showing much concern so far. Technically, the bond and mortgage markets continue to support higher prices and lower yields. Traders continue to play the stock market against treasuries. As long as stock indexes are weaker, money will flow into treasuries; higher stock indexes pressure the bond market.
We expect an increase in volatility this week. Rates should continue lower; however, each data point this week has the potential to swing markets.