Traders have been watching the debate closely, and it's possible that passage of the Healthcare Bill could have a negative impact on the Stock market. If this is the case, there could in turn be a positive outcome for Bonds and home loan rates.But that's not the only action traders were keeping an eye on last week. Tuesday's meeting of the Federal Open Market Committee offered little surprise, with no change to the Fed Funds Rate, which is the rate banks charge each other for lending overnight, or the language describing that the Fed Funds Rate would remain "exceptionally low for an extended period of time."
While there is growing and well-warranted concern that continuing to keep rates low will lead to inflation down the road...and remember, inflation is the arch enemy of bonds and home loan rates...it does appear that inflation is subdued at present. Last week's reports showed that the Producer Price Index (PPI), which gauges inflation at the wholesale level, was reported well below expectations and at the largest monthly decline since July 2009. Meanwhile, the Consumer Price Index (CPI), which measures inflation at the consumer level, came in just below expectations for February.
And there were additional headlines last week on other possible action that could impact Bonds and home loan rates negatively. Both Fitch Ratings and Moody's have stated that the US has moved substantially closer to losing its AAA credit rating. This would be a very bad turn of events, as it would cost the US a lot more money in interest payments, by way of higher rates, to attract new investors to buy our Bonds. And higher rates on Treasuries would influence home loan rates higher as well.
If you or someone you know would like to learn more about how you can take advantage of today's low-rate environment, or the Homebuyer's Tax Credit which is due to expire on April 30, give me a call.
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