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Interest Rate Changes Crazy Like a Yo-Yo

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Perhaps the Fed should further cut their debt purchases

Down, up, down, up, down, up, down, up, down, up, down. One needs to see it to believe it but for 11 straight weeks the action in the interest rate market has been a yo-yo. I get a chuckle reading some articles in the press over the past week that real estate sales have been down and one of the reasons is rising interest rates.

Thankfully real estate sales in our area have been red hot but if they were down I am not sure you could put much blame on interest rates. As of this morning the average overnight rate according to MarketRate sits at 4.24% down a full 8 basis points from where we stood a week ago.

Even more remarkable than the almost 3 month long yo-yo effect is the fact that rates this morning are at the lowest levels we have seen since November 3rd of last year. With the Fed's Quantitative easing program being cut by 30 billion dollars a month just what is going on? This program was implemented to keep rates artificially low to boost the economic recovery. No doubt it was helpful but now that they have cut the purchasing program by over 35% rates have fallen. As John Prine sings it is indeed a big old goofy world.

We still remain unconvinced that interest rates can move much higher. After all each 1% move higher means an additional $170 billion dollar annual payment on our enormous debt. But interest rates are to blame for falling sales.......interesting and fun.....and goofy!

Fins up.............

Tom Priester
Principal Broker

Paradise Sharks Real Estate



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