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Fed Drops First Rate-Hike Hints

Contributed by mm | December 15, 2003 11:32 AM PST



"Fed Drops First Rate-Hike Hints" is an excellent story from BankRate.com on key drivers that may trigger potential rate pretty soon.

According to the article, "the futures market pins the probability of the first interest rate hike at 76 percent by May and a 90-percent chance by June."

Some consequences I can think of:

For personal finance:

- Credit card rate will increase with the rate change.
- Mortgage rate will jump too. Better buy house now than later.
- Less interest-free sales promotions and 0-APR car deals.

For investments:

- Less business for mortgage companies like CFC
- Maybe a good sign for companies with lots of mortgage servicing rights (WM) and private mortgage insurers (MTG, PMI)
- Will be a challenge for FRE and FNM to manage financial risk
- Increasing rate will add more burdened to companies with heavy debt
- A less steep yield curve may lead to weak yield in mortgage-based security REITs (FBR, TMA, NLS, etc.)

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