Rates Dependent on Balance of Reports
Overall, the interest rate trend from last week was probably put best by Federal Reserve Chairman Bernanke. He spoke earlier in the week that as long as commodity prices come under control relatively soon, there shouldn’t be any major concern over the inflation outlook. That message carried through as rates eased over the second half of the week.
Although inflation concerns have been creeping into economic reports and commentary, the Consumer Price Index indicated that prices were in line with expectations, and retail sales were just slightly lower than expected, both of which tapered off inflation concerns. Treasuries also rallied after news that Greece may have to restructure their debt and Moody’s downgraded Ireland’s credit rating to the lowest investment grade with a ‘negative’ outlook. In terms of un-employment, although Initial Claims last week were higher than expected, Continuing Claims were lower, which most viewed as neutral. Financial institutions also turned for the better as the Wall Street Journal reported that major banks were close to a deal with SEC regulators to settle fraud allegations on mortgage-bond deals.
To start the week, Standard & Poor’s put a ‘Negative’ outlook on the AAA credit rating of the U.S., claiming the nation’s leaders may fail to appropriately deal with the rising budget deficit and debt issues. The impact here has been minimal overall thus far, but it will be important to keep a close eye on commentary here going forward.
Today’s economic releases are minimal, but we will see housing start data tomorrow and several reports on Thursday including Jobless Claims, Leading Economic Indicators, and some Home Price Index figures. The important word to look for is “Balance”. If reports remain balanced, or in line with expectations, rates shouldn’t see much change this week. If we see improvements that are better than expected, we may see rates nudge higher to offset some of last week’s drops.