Market Commentary

Stocks plunged as investors increasingly sought after sovereign bonds for haven to an extent where 10-Year Treasury yield broke below 2-Year Treasury yield this morning. An inverted yield curve, being a historically reliable preceding indicator of economic recessions, sent the yield on the 30-year Treasury bond to a new record low. The British yield curve also inverted for the first time since the financial crisis. Mortgages continued to underperform the benchmark 10-Year Treasury this morning. In Europe, shares slid after German GDP contracted by 0.10% in the second quarter. China also posted the weakest industrial output growth since 2002, all adding to ongoing concerns over slowdown in the global economy. In corporate news, Macy’s plunged to a nine-year low after posting weak results. On the trade front, after an all-out war, President Trump is stepping back by delaying the imposition of new tariffs until December and Chinese officials are still reportedly proceeding with their visit in Washington in September. Elsewhere, WTI crude declined this morning, trading slightly above $55 a barrel.

Thanks to the average contract rate on a 30-year fixed mortgage reaching the lowest level since 2016, MBA Mortgage Applications index surged 21.70% from 5.30% in prior week. Both purchases and refinances rose 1.90% and 36.90% after falling 2.00% and rising 11.80% in prior week, respectively. Last week’s refinance activity marked the highest level since July 2016. Lastly, Import Price Index in July increased to 0.20% from a downwardly revised prior of -1.10% vs. -0.10% consensus.