REAL ESTATE NEWS...Rates are tanking and they could plunge further

Fear is gripping the bond market.

ISM data released Wednesday showed the services sector didn’t grow as much as was expected in January. That spooked traders and sent them scrambling to the safety of bonds.

The yield on the U.S. 10-year Treasury note (^TNX) dropped below 1.8% at one point on Wednesday as bonds rallied. Toward the end of the trading day, bond yields rebounded to 1.88%. Bond yields fall as prices rise.

Nonetheless, the market is trying to guess whether the Fed will raise rates at all this year. In December, the Federal Reserve increased its federal funds target rate range to between 0.25% and 0.50% from the previous range of 0% to 0.25%, where it was for 7 years.

According to data from the Chicago Mercantile Exchange, futures on the fed funds indicate the market doesn’t expect a rate hike this year or even at the start of 2017.

“The Federal Reserve seems to have lost a little bit of that control they've had over the last seven years during their zero interest rate monetary policy,” said Todd Colvin, senior vice president at Ambrosino Brothers.

He sees traders convinced that the Fed has lost its resolve. “If you go back to January 6, vice chairman [Stanley] Fischer mentioned the idea that there was a possibility of three to four rate hikes in this calendar year,” said Colvin from the CME. “On Monday of this week, he said there is no real timetable for any rate hike. And I think that that really spoke volumes to the market.”

Colvin expects more bond buying ahead as fears rise and investors search for quality and safety. “There's a place to be right now and that's in riskless assets,” he said. “And the favorite riskless asset on the globe is the U.S. Treasury.”

Should buyers bid up American government bonds, Colvin sees yields on the U.S. Treasury 10-year note falling a lot further.

“I think that 10-year yields could easily get to 1.5%,” he said, “not only because of weakness in the economy and low inflation but you have that pesky U.S. election coming up. And that could hinder the Fed's ability to really manipulate monetary policy at a time when, really, you want things to be apolitical as we walk into an election.”

“Right now, 1.5% target, but I certainly wouldn't make that the floor,” he said.