Do you remember the old adage, stock up bonds down? Well, that's what has been happening during the recent stock market rally. Since March, US treasuries have dropped about 900 basis points or $9000.00. Now remember that the price and the yield go in opposite directions. As the price goes down, The yield or interest rate goes up.The yield on the 30 year US bond stands at 4.21%
Why is the yield so important? For one thing if interest rates go up, mortgage rates will also rise. The Federal Reserve has vowed to bring mortgage rates down to help the housing market. It even took the bold move of buying treasuries to pump more money into the banking system. So far, the Federal Reserve has bought $300 billion of US treasuries.
Now, if we add today's weak housing numbers into the mix, the Federal Reserve will most likely be forced to buy more US treasuries to drive rates down again. So analysts estimate that the Fed will need to purchase up to $1 trillion of treasuries to keep interest rates low.
Some hint of Fed policies will be made public tomorrow when the Fed releases the minutes of its most recent meeting Keep an eye out for this report. Very often it is a market mover.
Do you believe that interest rates will remain low?
Closing Bell: Economic Catapult for Thanksgiving & Black Friday (WMT, TGT, GRMN, GOOG, MSFT)
Deere up on Q4 earnings performance
Reid Hoffman: LinkedIn will go public (at some point)
