Tuesday, June 10, 2008

Fresh Challenges for Housing?

Bond prices (AGG; top chart) have moved to their lowest levels (i.e., highest yields) since October, 2007 in the wake of Fed concerns over inflation and possible interest rate tightening.

Meanwhile, the homebuilders index ($HGX; bottom chart) is testing its bear market lows, having sustained none of the gains from earlier Fed easing. As mortgage rates follow bond yields, rising to multi-month highs and the U.S. dollar remains mired in its long slide, it's not clear that housing will find support from monetary easing any time soon.