Market Analysis

January 25th, 2008 5:52 PM
The bond market rallied this afternoon (rates improved) due to profit taking (selling) of stocks and a temporary parking of money in the bond market.  It is important to note that volume was very light on the stock market and this could simply be a "head fake" while investors reload their guns to find good deals early next week in the stock market.  Next week will be action packed with economic data and with a Fed meeting.  The market has fully priced in a .25 rate cut by the Fed at the conclusion of the meeting next Thursday the 30th.   Please note that  it is not a foregone conclusion that if the Fed cuts rates by .25% that the long term bonds would rally (rates decrease). It is probably more likely that the stock market would surge and all the money that has been parked in the bond market would shift towards equities which would also produce upward pressure on rates.  In this environment we believe that if you have a strong appetite for risk, you may see some improvement next week.  If you are conservative and don't like the uncertainty associated with playing the market it is safer to lock than float.  We have discussed our renegotiation policy in prior updates. If rates improve, we can renegotiate to within .375 points (points, not  rate)of the improved rates.  Thus if the market improves to 5.125% with 0 points, we can get 5.125% with .375 points. Locking provides the benefit of protecting against the market worsening with the ability to still getting within .375 points of an improved market.
Posted by Matthew Breston on January 25th, 2008 5:52 PMPost a Comment (0)
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