Trying to predict movements in interest rates on a day to day basis is certainly a fools errand and markets prove it everyday.
Yesterday we got a gross domestic product (GDP) report that was strong – stronger than anticipated. On the surface one would have expected interest rates to move much higher–I certainly expected it. The 10 year treasury which was trading around 4.92% at 8 a.m. (central) moved lower all day long to trade as low as 4.84% which is where it closed. In a world where we have some many different cross currents–i.e. wars etc. one can’t predict where rates are going over the very short term. Fortunately we don’t really need know where rates are going day to day because we don’t make decisions on a daily move in rates–fortunately.
Of course the strong economic numbers lately don’t bode well for FOMC rate hikes. It seems now the Fed has hemmed themselves in for the meeting next week (Oct 31-Nov 1) with heavy tilt toward ‘no hike’. But we are very closed to the point where a 1/4% hike is getting baked into the December (12th-13th) decision–there is simply no way the Fed is going to skip again with the strong economic news. We will see the personal consumption expenditures (PCE) in 30 minutes and this will give us more inflation data.
Watching CDs and now 5.7% is the top rate at the brokers I use – nothing to get overly excited about. Regardless of short term moves in rates the treasury is going to be looking to sell $1.5 to $2 trillion in debt next year and this will keep pressure on rates – it is going to be another very interesting year.
Well let’s see if the PCE news is going to create crazy markets or ho hum markets.