Interest Rates, Market Changes, Rocky couple days coming our way..

So we have some new news in regards to the possibility of interest Rates changing? We all stil don’t know, and that is the one consistency we all have right now. Today I have a feeling is going to be rocky on the market front. We will see how Wall Street reacts to President Obama’s Speech tonight.. Pray for the best..

We are up for some action the next two days starting with results from today’s enormous auction of $42B in 5-Year Notes released at 1pm ET.  Auction results can be a market mover – and handling the market reaction could be challenging today, as just about an hour later, the highly anticipated

and pivotal Fed Policy Statement will arrive, at 2:15pm ET.

The Fed Funds Rate will remain unchanged. However will the Fed hint that they may start to shift away from their present accommodative policy, by the exclusion of the line they’ve included in all of 2009’s Statements, about rates staying low “for an extended period”?

And what might the Fed say about their present Mortgage Backed Security purchase program?  It has been made clear at each of the last two meetings that this program will end.  But there has been chatter from different Fed Members, who feel this program should be extended.  However, the Fed and Mr. Bernanke have come under fire for the expansion of the Fed’s balance sheet – and with $1.25T already added to the Fed’s balance sheet in MBS purchases, it’s hard to imagine a meaningful expansion taking place. Which could see rates on the rise.

Hopefully we get a clear message on this today as the market hates uncertainty.

And in the backdrop of this two day meeting is the elephant in the room…the Fed Chairman himself, Ben Bernanke doesn’t have confirmation yet that his position as Fed Chair will continue for another term.

Tonight, President Obama delivers his first official State of the Union address.  The administration has come under heavy fire, so it will be interesting to see how President Obama responds, and whether he stays the course or changes direction. These addresses can cause market reaction the following day – so we expect the next 24 hours in the market to be quite bumpy.

This article was written by

Aaron Butler <aaron.butler@academymortgage.com>

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