Prior to tomorrow’s Fed announcement with regard to the future of short-term interest rates, pricing on long term bonds such as mortgages have spiraled downward and are now at the lowest levels since last July. High-risk bonds (AKA: junk bonds) have seen the greatest decline by far. As these assets continue to decline in value, they could either drag down mortgages with them, or we could see monies from the sale of junk bonds come over into the mortgage market and help drive “safe” yields down (ie: rates for home loans could drop). Could be an interesting couple of days.
Plummeting oil prices are keeping consumer cost of living down, and inflation well below the Fed target of 2.0%. On the producer level, the manufacturing sector is really struggling as a result of our strong dollar enabling the purchase of cheaper goods from abroad than what we an produce domestically. That could lead to a spiral all of it’s own.