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Monday, January 26, 2009

Inflation: The Enemy of Bonds and Mortgage Rates

Inflation chatter could come around again this week, as the Fed will be holding their regularly scheduled meetings on Tuesday and Wednesday, with their Policy Statement and decision regarding the Fed Funds Rate coming on Wednesday.

Remember, the Fed made history last month when they slashed the Fed Funds Rate by .75% to the lowest target range in history of 0% to .25%.

Other potential market movers include Friday's Gross Domestic Product (GDP) Report. GDP is the broadest measure of economic activity, and given the state of our economy, a negative report might not be too much of a surprise.

In addition, Thursday's Durable Goods Report (i.e. items that are non-disposable, like cars, furniture, appliances, games, cameras, business equipment, etc) will give us a read on consumer and business consumption and buying behavior.

We got a look at the housing market with Monday's Existing Home Sales Report, which was rather strong. On Thursday we get the New Home Sales Report.

Remember: Inflation is the arch enemy of Bonds and home loan rates, and even the mention of it can have negative ramifications. I will be watching very closely to see how Bonds and rates respond to all the news of the week.

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