The Federal Reserve will likely maintain its interest rates regardless of job growth in the government sector. The trade war deadline has been postponed to August 1, affecting market reactions. The labor market shows signs of softening but has not deteriorated enough for a shift in Fed policy. Market reactions include a decline in stock prices and an increase in the yields on 10-year Treasury notes. Both the Fed and the markets are predicting future rate cuts but remain cautious amid ongoing trade tensions.
The labor market needs to weaken significantly for the Federal Reserve to pivot, or for bond yields to decline enough to bring mortgage rates below 6%. Currently, the labor market is showing signs of softening, but it hasn't yet truly broken.
The stock market closed lower on Monday while the yield on the 10-year Treasury note rose by a few basis points. The bond market is not fond of the trade war, meaning that bond yields have made sharp upward moves, which in turn have taken mortgage rates higher.
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