Today’s Philadelphia home buyers should focus on floating as bonds are trading higher, up 25 basis points, or 0.25%. After last week’s volatile ups and downs, bonds moved higher today on news of a possible German banking crisis. This potential crisis will push funds away from Germany and into the US markets. More reassuring news came from the Treasury Secretary Henry Paulson as he stated that this liquidity crisis is a result of a risk-adjustment and “is against the backdrop of a strong global economy [and] a very healthy U.S. economy.”
However, an active Fed is still vital in order to keep these unstable markets in line. Last Friday they cut the discount window rate, the rate at which the Fed lends to banks, from 6.25% to 5.75%, the first time since after September 11th, 2001. They are also extending the terms of this lending from 1 day to 30 days which will enable banks to more easily weather this ‘crisis.’ In other words, the Fed is doing what it can to resolve the situation and as of today we recommend Floating for Philadelphia home buyers.
By, Joe Brady