Moore Mortgage Solutions

    This past month or so has seen swings both in the stock and bond markets.

    Between companies coming close to bankruptcy to the Federal Reserve stepping in, it has been one very bumpy ride.

    And tomorrow, we may see more of the same. But let’s back up a little bit.

    At the beginning of last week, Bear Sterns, one of the investment brokers, started to lose investor confidence as to whether they could cover their subprime mortgage-backed securities. And as market news pundits talked about whether Bear Sterns had enough money to cover their margin calls, nervous investors started pulling their money out as creditors started to call in their margins.

    By the end of the week, Bear Sterns was running the risk of losing their liquidity. JPMorgan came to their rescue by providing an avenue for Bear Sterns to access the Federal Reserves lending window. This window can normally be only access by banks.

    But over the weekend, the run got worse so to save Bear Sterns from bankruptcy, JPMorgan purchase a majority share of the company.

    Also over the weekend, the Federal Reserve opened their discount window to all non-banking firms. At the same time, they also lowered the discount rate by .25%. The discount rate is the rate that the banks can borrow from the Federal Reserve.

    Tomorrow, the Federal Reserve will be having their scheduled meeting. Wall Street is betting that they will lower the Fed Fund Rate by 1.0% with another cut to come at their next scheduled meeting in April.

    What effect will this have on long-term interest rates? It’s hard to say. Normally when the Fed lowers their rate, the bond market reacts negatively as it sees this as inflationary and interest rates go up. But we may see a dip in interest rates for a part of the day or a couple of days like we did in January.

    Whatever the Fed's decision is tomrrow, if you are a part of my database, you will receive a notice as to the their decision.

    In the meantime, I am available to help you decipher the market conditions and help you make informed decisions.

    Until next time, make every day an inspired day!

Betsy Moore

betsy@mooremortgagesolutions.com

206-331-2749