Interest Rate Update

Kiplinger’s Letter said “Home sales and refinancing will sag as a result of interest rates.   But not by much.  Slightly higher home rates will be offset by bargain prices.  And the tax credit of $8,000 for first-time homebuyers will continue to charge up demand.  The Federal Reserve will let interest rates rise as long as mortgage rates remain in the 5%-5.25% range, as we expect.  That’s pretty low by historical standards.  And if the Fed bought more Treasuries to lower rates, it would spark inflation fears.”

I agree with this.  Today interest rates rose due to the job losses being better than expected.  However, the unemployment rate was higher than the expected 9.2% at 9.4%.  Hopefully we see a selloff in stocks with investors taking profits and going back into bonds.  Right now the only buyer and seller of bonds is the Fed.  They can only do so much.