August 17th, 2007 9:43 AM by Lehel Szucs
GOOD MORNING EVERYONE -
Below is a brief from one of the lenders we work with regarding the FED action last week. Interesting news........
"The FED lowered the Discount Rate this morning(last Friday) by 50 basis points. They have NOT lowered the Fed Funds target rate. This action is clearly targeted at addressing the immediate needs of banks and other lenders that may need more liquidity as opposed a more broad based rate cut resulting from concerns of a weakening economy.
Undoubtedly, many market players feel an actual cut in the Fed Funds rate will likely be coming soon. Earlier this morning Goldman Sachs announced that they expect the Fed Funds rate to be cut to 4.50% during 2007.
The effect of this mornings cut was a BIG spike in the equity markets (which I feel will be short-lived) and a modest up tick in yields as players feel this mornings actions may defer the FED from immediately cutting the Federal Funds rate.
I believe the ramifications of recent events will have a longer-term and more profound impact on the overall economy (i.e.--look for significant layoffs in mortgage banking related jobs on Wall Street for starters..) and that some weakness in the economy will occur resulting in the FED cutting rates. I don't view these recent events as the end of Western Civilization.
Bond yields are essentially unchanged on the day with T-Bills yields moving up somewhat in yield as flight to quality buying slows down in the face of today's FED action."
Please feel free to call us with any questions on the rates, existing programs, etc.
Have a wonderful week ~