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Daily Market Commentary

As we wait to hear what the Fed's take on inflation and the economy is this month, Bloomberg is reporting that the big mortgage GSE's Freddie and Fannie are moving to shore up their own balance sheets.  They were given the go ahead to purchase jumbo mortgages (over $417,000) in an effort to stem housing sector losses.  Instead, they are spending their money buying back their own securities.  This comes on the back of yesterday's plunging Case-Shiller house price index numbers, where we learned prices in 20 large urban centres have dropped 15% year-over-year.

 A boost for Bank of America was reported this morning, as Bllomberg reports that BOA will be able to use tax losses accumulated by mortgage lender Countrywide Financial to offset gains, saving them up to a billion over the next five years.  BOA will, of course, have to post some profits to offset them first. 

 Bonds are bleeding their way lower this morning, as fear sets in that the Fed will be overly hawkish this morning and further bias themselves to hiking rates.  Rarely have we seen sentiment turn around so fast on the interest rate front.  Remember, it was only 5 month s ago that we had an emergency 75 bp rate cut, and this rate cut cycle ended 8 weeks ago.  Recall last time a policy turned around, we had 1% Fed funds for a full year, and below 2% for 2 and a half years!  Arguably, they stayed too low for too long, but it took a long time to convince the market that rates needed to go higher - and that was a very mild recession. 

Stay tuned for the 2:15 pm release.



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