Wild Monday - Rate Cut Tuesday?
Posted September 15, 2008 10:38 p.m. EDT
Updated September 15, 2008 11:08 p.m. EDT
Well I was right about one thing – it was an UGLY Monday! The Dow having its biggest one day loss in over seven years! I knew the market reaction would be strong- but wow! Another one of the big five investment banks now gone – that makes three this year!
I know, you’re really interested in my next statement – what is this going to do to housing? Well… the simple and correct answer is that time will tell. The Fed is meeting tomorrow and by most accounts, it looks as though will make some type of rate cut – by how much or even for certain we’re just not sure… but I would say the chances are pretty good that some type of rate cut is delivered...
Interestingly enough we didn’t see much movement at all today in interest rates – even with the ten year treasury yields plummeting (typically we follow the direction of the yield as an indicator of rate movement – and as there is an inverse relationship between the price of a treasury yield and its yield, meaning that as prices drop, yields increase, and when treasury prices rise, yields drop – as we saw today.)
Bernanke and Co meet tomorrow and around 2:15pm we may have our answer as to their deliberations. I’m going with a rate cut – the measure of influence only to be determined post 2:15pm tomorrow.
Jeremy M. Salemson
Corporate Investors Mortgage Group, Inc.