Weekly Market Preview

This Week; interest rate markets will start at their highest yields since the huge sell-off began three weeks ago.

Last week there was no real economic measurements, this week the economic calendar has a number of data points that will get close attention; two inflation gauges (PPI and CPI), two regional Fed economic indexes (NY and Philadelphia Fed indexes), housing starts and permits for Nov (both expected to be stronger).

The elephant however is the FOMC meeting on Tuesday; the statement will be critical after the recent increase in rates, will the FOMC try to jaw bone the rate markets to slow the climb?
 
Interest rates, after all the recent hand wringing on the quick jumps in rates, are still historically low as we have reminded more than a few times. Everyone should try and keep the increase in rates in some wider perspective.

Interest rates were destined to increase, it was not logical that rates could stay as low as they were prior to Nov 4th when rates started their ascent.  Rates are increasing across the globe as the economic outlook improves.

China is helping add inflation concerns in the US bond markets; its rate is at 6.0% with increasing talk China may raise their rates. Here in the US the Fed has made it very clear it wants the US inflation rate higher, mix in the expanding US deficits and there are plenty of solid reasons why interest rates have increased.

How much higher? Likely they will continue to increase but not at the swift pace we have now. The bond market this week should do somewhat better as long as it gets a positive trigger from the economic releases.