Mel's Blog

Mortgage Bond prices are trading higher again, and are now at their best levels in over 26 months.  This presents some great refinance opportunities - especially in light of the add-ons from Fannie and Freddie if credit scores are below 680. 

LIBOR rates are significantly higher with an inverted yield curve.  This is due to the higher perceived risk that banks feel they are taking by lending money to each other in these uncertain times.  Again, this presents a great opportunity - most adjustables tied to LIBOR have or will adjust to a fully indexed rate around 8%.  

At 10:00am ET, the Institute for Supply Management (ISM) will be reported.  Economists are expecting a reading of 50.5.  A number above 50 indicates economic expansion in manufacturing, while a reading below 50 shows contraction.  We don't expect this to be a big market mover unless the report wildly misses expectations.

Meanwhile, the Stock market is coming off one of its largest weekly point gains in several years with the Dow notching its largest gain in more than four years, rising 390 points.  This is all on the heels of an expected Fed rate cut on December 11th.   

Technically, Bond prices continue to ride the Up Escalator, and are now trading just under yet another ceiling of resistance at $101.78.  With prices overbought, the Bond is ripe for a reversal lower.  I advise Cautiously Floating, but be ready to Lock as the increased volatility and near-term resistance could turn prices lower.