US Stocks are experiencing another seesaw day of trading, and are currently fighting to get back to par.  Mortgage Bonds have held their ground as they trade in one of their tightest ranges in weeks.  

The Stock Market came out with positive momentum early on, as once again Lowered Expectations paved the way for gains.  Bank of America was able to report a 41% decline in year over year profits, and still beat the Street's projections.  This made it 4 out of 5 of the nation's top banks beating expectations, and seems to have eased the worst fears concerning a financial sector collapse.  Today marks the first day of regulations inhibiting naked short selling put in place after the meltdown of value for Fannie, and Freddie. The majority of those Financial companies affected by that rule experienced positive gains last week as many traders closed out the positions targeted by those restrictions.  It remains to be seen whether they can maintain the positive momentum.  

Mortgage Bonds ran into a buzz saw at the end of last week, and fell below several layers of pricing support.  The incredibly low expectations set for the market continue to drive Stocks, and pressure Bonds.  The Treasury is also set to sell/issue the largest amount of short term debt it has in the last 5 years, with $31 Billion in 2 year notes coming to market on the 23rd, and $21 Billion in 5 year notes on the 24th.  These will allow the Treasury to raise necessary funding for future actions concerning Freddie, and Fannie should they be necessary.  Today's action points to a  belief that the economy is stabilizing, and has resulted in a 69% chance that the Fed will raise rates come the next meeting in August.  In the long term, that would be a positive for Bonds by helping to stabilize the Dollar.  

After falling hard the end of last week, Bonds have arrived at a low point that has been a solid line of support in the past.  Although there is little news outside of the generally poor economic outlook to give Mortgage Bonds positive momentum, the support levels are enough for me to recommend floating today.   

 Make it a great day!

Ron Brown

Loan Officer

First Mortgage Company of Washington

615 E Pioneer Ave.
Puyallup, WA 98372
(253) 520-0000