Market Bets On Interest Rate Cuts

Market Bets on​ Interest Rate Cuts
The confirmation of​ the​ weakness in​ the​ international stock market stunned investors and​ lifted expectations that the​ Federal Reserve would be forced to​ cut interest rates .​
After last week's miserable job scenario, the​ investors in​ treasury securities are very sure that the​ Federal Reserve is​ about to​ get on​ a​ sequence of​ federal funds rate cuts .​
They are particularly worried about the​ recent economic weakness that can be an​ attribute to​ the​ lack of​ business confidence more than weak-hearted consumers.
Experts believe that - It is​ not the​ consumer but the​ businesses that are frightened .​
It is​ clear that the​ consumer demand is​ holding up and​ helping the​ market to​ sustain the​ 2 percent of​ growth.
On the​ other hand, the​ loss of​ 4,000 jobs in​ the​ month of​ August, were the​ first drop in​ four years .​
This suggests that the​ Federal Reserve is​ behind the​ curve in​ lowering the​ rates .​
On this Mr .​
Peter Morici, a​ professor of​ business stream at​ the​ University of​ Maryland said .​
There is​ fear out there .​
But we are probably going to​ see strong productivity because employers are unwilling to​ hire.
The return on​ 10-year Treasury notes plunged 14 basis points on​ the​ last week to​ trade at​ 4.37 per cent, a​ level where it​ never reached since late 2018 .​
The credit crunch stays, with the​ institutional investors totally unwilling to​ buy all types of​ securities and​ the​ sub prime mortgage market remains a​ tragedy.
An economist analyzed that the​ rate of​ seizing property due to​ unpaid mortgage dues or​ installments has rose to​ a​ record in​ the​ second quarter, and​ even the​ payback default rates for​ prime borrowers rose to​ the​ levels that have been not seen after the​ 2001 recession.
The standard three month London interbank offered rate Libor was about 5.72 per cent late last week .​
The increase of​ 36 basis points during the​ past few weeks is​ its highest level after early 2001.
Libor generally determine the​ short-term borrowing costs for​ many companies around the​ world, as​ well as​ interest rates on​ adjustable rate mortgages in​ the​ country .​
It is​ believed that the​ rise in​ the​ Libor rates has caused rates on​ adjustable rate mortgages, to​ point even as​ the​ usual long term mortgage give ups have fallen.
The higher Libor rates also makes it​ less expectable that the​ banks will borrow from each other .​
This is​ considered as​ a​ problem and​ it​ shows the​ tightening of​ the​ monetary policy.
In the​ interim, the​ waiting game is​ over to​ the​ next week's Federal Reserve meeting .​
The main US economic data due this week include the​ trade shortage and​ the​ ABC news consumer confidence index today; the​ Mortgage Bankers Association's mortgage applications date tomorrow; initial jobless claims on​ Thursday; import prices, retail sales, industrial production, capacity utilization, business inventories etc on​ Friday.
The Canadian data due this week include housing starts, the​ new house price index and​ the​ international merchandise traded surplus tomorrow, industrial capacity utilization on​ Thursday and​ manufacturing shipments and​ labor productivity on​ Friday.

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