Monday Market Commentary

by Alex Stenback on December 5, 2005

Dec_5_rates
                                                        Graphic Courtesy MSNBC
Last Week
Mortgage rates were virtually unchanged last week as a number of solid economic reports checked in slightly stronger than expected or right on the consensus numbers. 
This Week
Could be an interesting week, rate wise.  The market has fully priced in the next two Fed rate hikes.  It is, however, still uncertain what the Fed will do next given the mixed (though positive) economic picture that recent data suggests. The Fed will either take an extended pause (stop raising rates) or continue to tighten – this of course depends on how the economy fares in the coming months. BUT investors will do their level best to predict this outcome in advance, and drive interest rates accordingly. If market participants conclude that the economy will improve and the Fed will continue to tighten, rates may move up.  If they conclude that the economy will slow, and likely force the Fed to pause, rates could move down.
· This Week’s Economic Calendar [barrons.com]

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