Did the Direction for Interest Rates Change?

The bond market today surrendered some gains from the recent treasury rally, as investors digested the September 20th minutes of the FOMC meeting.

The minutes dwelled on the possibility of lingering inflation, rather than slowing growth, as having the more immediate impact on interest rate levels.Adding to these minor inflation fears was the continued weakness in the price of crude oil which allows for more disposable income to circulate throughout the economy.

Meanwhile, the cost of bond insurance dramatically increased as more, and larger, private-equity deals gained favor. As the private equity market issues massive amounts of debt to finance ever larger deals, credit ratings are adversely affected by the dilution.

The takeaway: further easing of interest rates may be delayed.