MMG Update - Monday, May 21, 2007 10:27am ET
Current Trend Direction: Lower
Risks favor: Cautiously Floating, while above support at $97.97
Current Price of FNMA 5.5% Bond: $98.03, -3bp
The Bond Market appears to be catching its breath this morning after getting roughed up last week - and there is not an abundance of economic news ahead to potentially influence a reversal of fortune for Bonds. Therefore, technicals and other markets like Stocks will play a bigger role over the next few days.
What's that sucking sound? It's the flaming hot Stock market sucking money out of Bonds, which has caused Bonds to lose about 80bp since our perfectly timed Alert to Lock on May 11th. In fact, a look back at the Alerts and Daily Update advice over the past few months have caught the highs in Bond prices - so your clients should be very pleased.
Bond Prices are nearing an important floor of support at the $97.97 level, just 6bp below present levels, and also matching the lowest prices of the year hit in late January. We will want to be patient and see if this floor can stop the recent downtrend. On brand new transactions, we are going to advise Cautiously Floating as the Bond hovers just above this floor of support.