The waiting game continues. As our Representatives in Washington DC, the President and the members of Congress dilly-dally instead of getting serious about negotiating a deal to avoid the major tax increases and automatic spending cuts known as the fiscal cliff, market participants have no choice but to wait for signs of movement. Today, with no new information to consider markets are calm.
Mortgage rates have ticked higher this morning after a positive start for the stock market. In the absence of news on the fiscal cliff, the stock market today is trading simply based on non-US and corporate news. A positive economic report from Germany and a halt to the recent fall in the stock of Apple has turned trading positive this morning.
Equally, if not more importantly today, the US Federal Reserve’s Open Market Committee begins a two-day meeting at which it is widely believed to announce a new program for the purchase of long-term government securities. It’s Operation Twist program, in which existing short-term securities in its portfolio were replaced with longer-term securities (primarily mortgage-backed securities) has helped to push rates to the all-time lows where they currently sit. However, Operation Twist will end at the end of this month. Without new buying by the Fed, rates would definitely rise, yet new purchases expand the Fed’s balance sheet which adds to the risk.
Tomorrow all eyes will be on the Fed and their decision to pursue additional quantitative easing. I also expect the market will be waiting to hear the thoughts of Chairman Bernanke in the post-meeting news conference regarding the fiscal-cliff and longer-term budget matters. I expect the Fed Chairman to let our political leaders “have it” with both barrels tomorrow and explain clearly just how much damage is possible if we fail to reach a deal on these fiscal matters.
Mortgage rates have ticked higher this morning after a positive start for the stock market. In the absence of news on the fiscal cliff, the stock market today is trading simply based on non-US and corporate news. A positive economic report from Germany and a halt to the recent fall in the stock of Apple has turned trading positive this morning.
Equally, if not more importantly today, the US Federal Reserve’s Open Market Committee begins a two-day meeting at which it is widely believed to announce a new program for the purchase of long-term government securities. It’s Operation Twist program, in which existing short-term securities in its portfolio were replaced with longer-term securities (primarily mortgage-backed securities) has helped to push rates to the all-time lows where they currently sit. However, Operation Twist will end at the end of this month. Without new buying by the Fed, rates would definitely rise, yet new purchases expand the Fed’s balance sheet which adds to the risk.
Tomorrow all eyes will be on the Fed and their decision to pursue additional quantitative easing. I also expect the market will be waiting to hear the thoughts of Chairman Bernanke in the post-meeting news conference regarding the fiscal-cliff and longer-term budget matters. I expect the Fed Chairman to let our political leaders “have it” with both barrels tomorrow and explain clearly just how much damage is possible if we fail to reach a deal on these fiscal matters.
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