Market Analysis

Current market rates are already "pricing in" a 100% chance of a .25 point cut by the Fed in their Funds Rate on Wednesday and a 70% chance of a 50 point cut.  Though it sounds odd, the probabilities for lower rates probably lie more in the Fed choosing the .25 cut because it may not be as much as equity investors wanted and they may send the stock market lower on that news.  Funds leaving the stock market would go to the bond market potentially driving the price of bonds up and the yields/rates lower.  If the Fed cuts .50 we will most likely see a robust stock market response which will attract funds currently "parked" in US Treasurys and Fannie/Freddie Mortgage Backed Securities which may drive long term rates up.
Posted by Matthew Breston on January 28th, 2008 10:45 AMPost a Comment (0)
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