China hiccups - North America gets the flu....

Well today we saw how the world markets can interact - globalization was in full form and effect. China's stock market dropped approx 10% overnight and the sympathetic tsunami came ashore on the north american markets this morning causing a watershed of 400 points in the DOW and over 300 points in the Canadian markets. Gold was down - the baby might be thrown out in the bath water - time will tell tomorrow and later this week.
but what does that have to do with our mortgage market....well there will be a flight to safety which means bond yields will be pushed higher on greater demand and rates will move up - thus the potential for lower interest rates in the short term may be hampered.. however....
The US economy is definitely slowing on the back of a declining housing market - if the stock market follows - the average american will encounter the reverse wealth effect - in otherwords they will feel poorer than they are feeling today - this would possibly move them into a defensive mode of protecting their money rather than spending - this would force the US to reduce interest rates in order to hopefully spur the economy - this drop in rates internally might work but they may be forced to increase external rates in order to keep their dollar from plummetting - a very tricky situation.
For now - keep an eye on the bond markets in Canada - this morning the 5 year bond dropped below 4% as did the 7 year government bond - this is down from the 4.10% level of approx a week ago - if this persists - rates should drop - especially after the RRSP season is finished on March 1st .......lets see what happens. (greygoose out...)

February 21st - can spring be far away....?

As outlined previously - the bond market is softening at this point and we are seeing interest rate pressures ease. Perhaps the interest rates will return to the 5% level in the next few weeks, after the completion of the RRSP season for Canada. The Federal Budget is scheduled for March 19th - so there may be a lull until the budget has come out... I still think the only major problem can be the housing market in the US slowing to the point of taking their economy down - which would spill over to Canada. Also of note the margin on stocks is at an all time high...which means people are borrowing to play the market - could mean a correction is on the way......beware....

interest rate fluctuations

On January 16th - I warned that rates may be ready to increase to the 5.25-75 range - and lo and behold - it has come to pass - interest rates for 5 year money is now 5.19-5.25%
the question now- what happens next - well let me gaze into the crystal ball again - the US Central Bankers - think there is a soft landing instore - which should lead to a higher stock market and perhaps higher interest rates - there are 2 weeks left until the end of the Canadian RRSP period for 2006 - if rates dont soften in early March - we may be on the march to higher rates - but remember - with current rates of 5% - it is unlikely interest rates could climb more than 1% as this would represent a 20% increase which would likely trigger a recession and force rates down....time will tell...stay tuned