Current Trend Direction: Sideways
Risks favor: Carefully Floating
Current Price of FNMA 5.0% Bond: $100.81 -9bp
In light of the recent price improvement in Mortgage Bonds, we have now switched our focus to the FNMA 30-year 5% Bond. This change is reflected on the Bond Page and text messaging.
There are no economic reports due for release today. The ongoing disconnect between the 10-Year Note and Mortgage Bonds continues and can be seen clearly on the Bond Page. There is a large $28B 3-year Note auction this afternoon, which could pressure the Bond market due to added supply.
Stocks are rising today on word that Congress will approve a $15B bailout to keep the Detroit 3 auto makers from seeking bankruptcy protection. However, there is speculation that a so-called "car czar" would be appointed who could force GM and Chrysler LLC into Chapter 11 bankruptcy if the companies don't come up with a restructuring plan by March 31.
Also helping Stocks are shares of energy companies, which are getting a lift from higher oil prices this week. Oil, now at $44.50 a barrel, has risen almost $4 a barrel since Friday's close of $40.81.
Mortgage Bonds are trading in a wide sideways range between a floor of support at $99.96 and resistance at $101.25. We will try and float, but be mindful of the heightened volatility and the continued de-levering we are seeing in the hedge fund world, where hedge funds are dumping well performing Mortgage Bonds into the market in order to raise capital.
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