This Week; of course it's the Cliff the headlines. This week the FOMC meeting concludes on Wednesday with expectations the Fed will announce it will continue to buy US long dated treasuries when Operation Twist expires at the end of this month. The key economic data isn't out until later this week with Nov retail sales, PPI, CPI, industrial production and factory use. Treasury will auction $66B of notes and bonds starting Tuesday through Thursday, 3 yr, 10 yr and 30 yr issues will be sold.

There has been no outward progress on the stand-off between President Obama and Republicans in the House. Last week a number of Republicans were leaning toward compromise with Obama on tax increases for the wealthy but the leadership has not bent, at least as far as public comments indicated. The President is unwilling to move off his position while the Cliff is coming quickly. Whether or not the country goes over, based on comments and forecasts from pundits, is now about 50/50. Whatever comes of this intransigence it is unlikely the this issue will be solved. The likely end game as it appears now is both parties will agree to extend the Bush tax cuts for a short time through the beginning of next year, allowing more time to look incompetent. Washington politicians haven't been able to accomplish much over the last two years; so far the Cliff negations are no different.

The bond and mortgage markets haven't moved much over the last three weeks. Until something significant occurs the rate markets are not likely to change much. No decline in rates and no increases of significance. The same is also expected in the equity markets.