Risks favor: Cautiously Floating as Bond clings to support at 200-day Moving Average
Current Price of FNMA 6.0% Bond: $100.09, Unchanged
After trading beneath the 200-day Moving Average earlier this morning, Bond prices have now bounced back higher and are presently resting right on this important floor of support.
Sub-prime mortgage woes are back in the news this morning after Citigroup Bank forecasted a sharp decline in third-quarter profit and Switzerland 's largest bank, UBS SA, reported it would post a pretax loss of up to $690 million in the third quarter. Both companies cited losses related to deteriorating conditions in Mortgage-Backed Securities, US Sub-prime mortgages and the credit markets overall.
Traders are now waiting for this morning's important data on the health of the manufacturing sector with the release of the Institute for Supply Management's (ISM) Manufacturing Index for September. Economists are expecting the ISM Index to be reported at 52.5, and it will take a large miss in either direction for Bond prices to move much on this report.
Until we get closer to Friday's big Jobs Report, right now it is all about the 200-day Moving Average. And with that heavy hitter waiting in the wings, Bonds are likely to stay close to the 200-day, as Traders won't want to place big bets either way in advance of this report. We will continue to Float Cautiously and watch prices as they trade near the 200-day Moving Average, which for the moment is serving as a floor of support. All information is from Barry Habib and the Mortgage Market Guide.
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