Week Ending May 27 Financial Markets Update

Bond yields fell across most of the curve for the third straight week marking their lowest levels in over a month. Yields tumbled on Tuesday as investors renewed demand for safe-haven treasuries after negative earnings news created caution around advertising and consumer spending. New home sales also disappointed on Tuesday after reporting a 0.591 million annual rate, well below the consensus expected 0.749 million and marking a 27% drop from a year ago. The spike in the average mortgage rate to 5.24% paired with higher-priced homes and broad-based inflation has cut demand. The release of Fed minutes on Wednesday left yields little changed. Most US policymakers view half-point rate hikes as appropriate at the next two meetings but left the door open for a pause in early fall. Officials believe expedited tightening in the coming months would leave the Fed “well-positioned later this year to assess the effects of policy firming and the extent to which economic developments warranted policy adjustment.”