Passage of the Healthcare Bill will have impacts on the markets.

"I WILL ACT NOW. I WILL ACT NOW. I WILL ACT NOW. " Og Mandino. And wondering what kind of action will happen on Healthcare reform was certainly on everyone's mind last week. But what does this mean for the markets and home loan rates?

Traders have been watching the debate closely, and it's possible that passage of the Healthcare Bill could have a negative impact on the Stock market. If this is the case, there could in turn be a positive outcome for Bonds and home loan rates.

But that's not the only action traders were keeping an eye on last week. Tuesday's meeting of the Federal Open Market Committee offered little surprise, with no change to the Fed Funds Rate, which is the rate banks charge each other for lending overnight, or the language describing that the Fed Funds Rate would remain "exceptionally low for an extended period of time."

While there is growing and well-warranted concern that continuing to keep rates low will lead to inflation down the road...and remember, inflation is the arch enemy of bonds and home loan rates...it does appear that inflation is subdued at present. Last week's reports showed that the Producer Price Index (PPI), which gauges inflation at the wholesale level, was reported well below expectations and at the largest monthly decline since July 2009. Meanwhile, the Consumer Price Index (CPI), which measures inflation at the consumer level, came in just below expectations for February.

And there were additional headlines last week on other possible action that could impact Bonds and home loan rates negatively. Both Fitch Ratings and Moody's have stated that the US has moved substantially closer to losing its AAA credit rating. This would be a very bad turn of events, as it would cost the US a lot more money in interest payments, by way of higher rates, to attract new investors to buy our Bonds. And higher rates on Treasuries would influence home loan rates higher as well. 

Bonds were able to improve above important technical levels in the middle of the week, but were unable to hang on to these improvements. As a result, Bonds and home loan rates ended the week about the same as where they began.

The action during Sunday's healthcare vote will almost certainly impact the markets in the coming week, and there is also a full slate of economic reports to watch for. First up, there will be a double-dose of housing news with Tuesday's Existing Home Sales Report and Wednesday's New Home Sales Report.
Also, on Wednesday we'll get a read on the health of the economy with the Durable Goods Report, which gives us an update on consumer and business buying behavior on big ticket items that last for an extended period of time. Friday will bring another read on the economy with the Gross Domestic Product Report, which is the broadest measure of economic activity.

Not to be missed will be Thursday's weekly Initial Jobless Claims Report. While last week's initial claims were essentially inline with expectations, the ugly component of the report was the 5,888,048 people collecting EUC (Emergency Unemployment Compensation) benefits. This is a 360,000 person increase from the prior week.  It easily could have been far worse.  The labor market continues to be weak.  Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.

If the employment and local real estate market continue to improve, as they have in some ways, we will see some improvement in the feel for the economy.  The ever elusive "consumer confidence" level that we hear about from time to time.

If you or someone you know would like to learn more about buying a home, have them give me a call.

Keith Lambert
310-398-3272