Posts Tagged ‘Spending cuts’

Market recap for week ending 02/22/2013

Posted on: February 22nd, 2013 by Fred Bohman No Comments

At the time I am writing this, mortgage interest rates are less than 1/8th lower than they were last Friday.

Both the 10 year Treasury bond and mortgage bonds continue to be contained in a narrow range. With the Federal Reserve(FED) still committed to buying large quantities of bonds through their quantitative easing program rates have not been able to increase much. On the flip side the string of positive economic news we have seen lately has kept rates from dropping.

Earlier today St Louis Fed President Bullard was on CNBC telling investors not to worry, and that the FED is not stopping their quantitative easing program (QE) any time soon. His comments were in response to the release of the January FED meeting minutes which showed discussion on how to wind down QE when the time comes. Any time there is discussion of slowing or stopping QE investors tend to get nervous, but after Bullard’s comments market volatility died down.

The $85B of mandatory spending cuts is coming up on next Friday and we have not heard much from either side in Washington on how to deal with it. Surprisingly the market does not seem too concerned with it, either because investors believe it will be avoided last minute or that the impact of the spending cuts will not have a large negative impact on the economy. I would expect to see increase volatility next week as we lead up to the dead line. I believe the only way we will see a drop in rates at this point is if we see a large correction in the stock market which is currently overbought.

Market recap for week ending 02/15/2013

Posted on: February 15th, 2013 by Fred Bohman No Comments

At the time I am writing this, mortgage interest rates are less than 1/8th higher than they were last Friday.

Both the 10 year Treasury bond and mortgage bonds have been contained in a narrow range for the last few weeks. Technically the mortgage bonds are over sold and the stock market over bought and should be due for a correction, but so far any movement that way have not been able to keep any momentum. If we do see a correction we should see a small dip in rates, but don’t look for it to be long lived as the general trend continues to be rates going higher. The reason that rates are on the increase is that we are seeing more and more positive economic reports coming out.

Today the Empire State Manufacturing index was released and had the largest gain in 30 years. It showed that manufacturing is recovering which is a sign that our economy is getting back on track. The mandatory spending cuts are due to set in on Match 1st which is approaching quickly and as usual Democrats and Republicans can’t agree on how to deal with it. Democrats want a 10 month extension on them in exchange for some smaller spending cuts and a tax hike. As usual Republicans are opposed to any tax hikes, so we currently appear to be in a gridlock. Surprisingly the market seems to be digesting it well and there is not much volatility. If our leaders can’t come to an agreement as we get closer to the March 1st deadline look for market volatility to pick up.