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By G. Steven Bray
A strong jobs report last Fri shot rates back up to their recent highs. Not only was the number of jobs created greater than expected, wage growth was at its highest since before the recession. Both stoked concerns about inflation, bad news for interest rates.
This week could be an interesting one for rates. First, this week’s Treasury auctions will debut newly increased auction amounts. It will be interesting to see if the current higher rates will be able to attract enough buyers or if even higher rates are needed to clear the auctions.
Later in the week, we have a Federal Reserve meeting. However, the chairman won’t have a post-meeting press conference, and no one expects the Fed to change its stance regarding interest rates at this meeting.
The wildcard this week is the election. It’s very likely markets have priced in the most likely outcome: Democrats take over the House and Republicans increase their numbers a little in the Senate. If we wake up Wed with different results, you can expect market volatility. Common wisdom suggests a bad night for Republicans could be good for lower rates as it would jeopardize the current trajectory of the economy.
If you’re floating your interest rate, I suggest caution. Rates are currently at the higher end of their recent range. Most pundits believe that if we break above that range, rates will move higher quickly.