Good Wednesday Morning, All!
Try and keep cool today, folks....it's going to be a hot 91 degrees today. Summer is definitely here!
"You can't triple stamp a double stamp Lloyd!" ...from the smash comedy hit, Dumb and Dumber. But that's just what the Chinese government did. In an effort to cool off the red hot stock market in China, the Chinese government decided to triple its "stamp tax" on stock trading transactions. Basically, this means it will cost Chinese investors more money to execute a stock trade. This event sent the Chinese stock market tumbling and the ripple effect has applied some modest selling pressure to the US stock market. As a result of lower global stock prices, money is moving from Stocks into Bonds and Mortgage Bonds are trading moderately higher.
Later today the action heats up as the US Treasury auctions $13 billion worth of 5-year Notes at 1pm ET. The added supply may provide a little heaviness to the Bond market.
Then at 2:00pm ET, the Fed Meeting Minutes from the May 9th meeting will be released. It will be very interesting to hear the Fed's dialogue on consumer inflation, as recent reports show it to be moderating into their target zone.
Since May 8th, Mortgage Bonds have been on a clear downtrend, and this translates into rate increases. Unfortunately, the overall picture isn't very good. The Down Escalator is nasty and stocks look poised to shrug off their early losses and move higher. Also, it appears unlikely that the Fed Minutes will show that the Fed is more comfortable with inflation. The odds of prices moving significantly higher (rates going back down) are slim..."So you're tellin' me there's a chance."
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