AgentIndustry News

Bond market speculates Fed will cut rates

Winter could see lowered short-term funds rate
Published on Aug 4, 2006

The Federal Reserve is done, says the bond market, now convinced that the Fed's next move will be to cut interest rates. Not soon -- winter, maybe -- but cut, and maybe a lot. The clincher was this morning's news that the unemployment rate rose from 4.6 percent to 4.8 percent in July, the highest since February, and a slim 113,000-job gain in July payrolls portends further increases in unemployment. Mortgage rates are falling again this morning, 6.5 percent on the low-fee deals, taken by the straight-line decline in the 10-year T-note to 4.88 percent. That good news said, be careful out there. Mortgage bankers: dampen ye hopes for a new refinance frenzy; Realtors: do not expect your hit-the-wall markets to re-leap; adjustable borrowers: do not expect the Fed to bail you out of your free-lunch error. The bond market is way ahead of itself. It is supposed to be ahead: long-term investors think long term, always anticipating the next cycle. So, the ideal time to buy bonds is at the momen...