Mel's Blog

Fed Day is here once again, and at 2:15pm ET, the Fed will announce their interest rate decision and policy statement.  We expect that the Fed will make a .25% cut, bringing the Fed Funds Rate to 2.00%.  But as I mentioned in yesterday's Update, what will really grab attention is the policy statement.  There is speculation that the Fed may signal the present cutting cycle is nearing an end, especially in light of renewed concerns over inflation.  If this is indeed the case, we may actually see Mortgage Bonds improve on the news - whereas in the past, Bonds have worsened in response to the Fed's cuts, as they serve to fuel inflation.  This announcement should be very interesting so stay closely tuned later today. 

In the mix this morning was a better looking ADP Employment Report, which showed 10,000 new jobs created, far exceeding their own estimates for 60,000 jobs lost.  ADP has not been a super accurate indicator for the official Jobs Report, but this positive reading did raise some eyebrows in the trading pits.  Tomorrow, I will lay out my Jobs Report strategy heading into Friday's important  release.  At the moment, economists are expecting the Department of Labor's report to show a loss of 75,000 jobs for the month of April.

The Chicago Purchasing Manager's Index for March was reported at 48.3, slightly better than expectations of 47.5.  The market offered little reaction to the news. 

Mortgage Bonds are tip-toeing on the 50-day Moving Average, but the news from the Fed this afternoon will trump all technical signals.  I will be patient and carefully float into the Fed announcement later today.