Not a good week; the second in a row as interest rates are moving higher rather rapidly. This week followed last week with big increases in interest rates across the yield curve, The 10 yr note yield jumped 17 basis points this week.

What happened? The safe haven moves into treasuries as the financial markets came close to total meltdown in the past four months has run its course and all that money that was parked in treasuries is moving out to find better returns; corporate bonds and in the equity markets. Mix in inflation fears, the reality that the Fed is done cutting its Fed Funds rate, or about to be, and a global increase in rates and huge increases in inflation rates in the Asian countries. The credit markets remain locked up but the counter-party fears that lead to the Bear Stearns collapse seem to be over; now what the world needs is not love but credit markets willing to lend.

With the FOMC meeting on Wednesday there is a toss up now as to whether the Fed will cut again; we hold to our forecast that the Fed will not cut at the meeting and that the easy monetary policy has ended. Does that mean interest rates will continue to climb? We do not expect rates to continue to climb as they have in the past two weeks; look for a choppy consolidation pattern to begin next week and likely last for a few weeks as financial markets will have to assess a lot of data and the $150B of checks going out to all citizens that paid taxes and didn't make a lot of money. The currency markets are also in play; watching to see whether the dollar can get a toe hold and recover some of the recent decline. If so commodity prices from crude to grains and industrial metals will work lower.