A different view on the housing bubble

In a prior post I mentioned that the bond market tends to bet on upcoming events.
Generally it's the FOMC Meeting or maybe the upcoming jobs report.
It's not something new, they've been doing it since the start, some may argue that it's just human nature.

A couple of months ago, all the talk was about the housing bubble.
Many experts were of the opinion that we were going to have major adjustment coming.
In other words "Hard Landing".

There were a few who suggested more of a "softer landing".

If we did have a hard landing, mortgages applications would slump dramatically.
Fewer buyers means fewer loans which would be a bad thing for the people who actually provide the money to the lenders.

A soft landing would be just a slow down. Something easily absorbed in the market.

So what if the Bond Market got it all wrong?
What if back in when all the talk was "Hard Landing" they banked on that and reduced the yields?

Now we are seeing that perhaps we're looking at an orderly slow down, (i.e. "Soft Landing").

Might that explain why we have a 2 month chart of the 10 year that looks like this?













Just a slightly different way of looking at things.

After Monday's holiday, and no new news, Tuesday's bond market resumed the worsening that we saw on Friday. The weekend's events from North Korea were ignored by traders , in the old days we'd see a flight-to-quality move in bonds that would have led to gains and the potential for mortgage rates improvements, but no such luck. The weakness in bonds was not helped by comments made by San Francisco Fed President Yellen yesterday afternoon that more easing in inflation is needed.

Later today the Fed will release the minutes to the September 20th FOMC meeting, which could move the markets. The key will be their concerns over inflation: the recent data on the economy has not been good, but it hasn't been all that bad either, so perhaps we're having a "soft landing", whatever that means. There does not appear to be too much downside risk for mortgage prices since recent comments by Fed officials have already been priced into the market. Tomorrow (Thursday) we"ll see the Goods and Services Trade Balance for August, and Friday we have Retail Sales.