Today we have switched our focus to the 6% Coupon Bond as it is more indicative of where home loan rates are currently. The 6% Coupon has been moved to the top of the grid on the Bond Page and your text messaging will now reflect this change.
Bonds are under selling pressure after Fed member, "Three Swing" Charlie Plosser had some tough words to say about inflation and the Fed's role. Looking like he took a page from our update of two days ago, he said, "Monetary policy is quite accommodative right now, inflation is on everybody's mind...We have to take appropriate steps to do something about that." What are those appropriate steps? We think it is to hike the Fed Funds Rate sooner rather than later.
Also adding pressure to Bonds was a surprisingly good May Retail Sales Report, which came in double expectations at 1%. Excluding autos, sales rose 1.2%, the biggest rise in six months and well beyond the 0.7% rise economists were expecting. Adding more strength to the report, were upward revisions to the previous month's figures.
Initial jobless claims jumped to 384,000, well above expectations of 370,000. Stocks shrugged off this news and after a couple of miserable days, they are trading sharply higher.
Technically, the Bond is teetering on support at the $100.03 level. On new transactions we can carefully float and see if support holds.
The Federal Reserve’s favorite inflation gauge the Personal Consumption Expenditure (PCE) was announced today. The Core PCE rose 0.1% during May, lower than expectations of 0.2% - which left the closely watched year-over-year Core inflation rate at 2.1%. This is outside the Fed's desired range of 1 - 2%, but the market rallied in light of the ongoing inflation fears...based on oils rise this week it has to come as a relief to the Fed.
Also, in the PCE report are readings on Personal Income and Spending, which both grew at rates larger than estimates in May. The boost in spending was likely due to the stimulus checks that were sent out to many American taxpayers in the beginning of May.
Oil hit another record high of $142.26 this morning. The inflationary fears inherent in rising oil prices are keeping a lid on both Stocks and Bonds. Stocks have been downright ugly, checking on CNBC, many stocks are at all time lows, the Dow is poised for the worst June since the Great Depression.
The University of Michigan's Consumer Sentiment index fell to 56.4 in June, from 59.6 in May. It's the lowest since 1980 and the third-lowest reading in the 56-year history of the survey. Mortgage Bonds are being boosted by this poor economic news. Bonds closed the day up 50 basis points, which means interest rates dropped today. We have had a good two day rally in bonds, let’s hope this continues next week.
If you want to get more involved telling your congress and senate representatives what you think go to www.votesmart.org. If your concerned about issues that are happening today such as high oil and food cost, job concerns or mortgage matter such as losing your home due to your mortgage rates going up to much or because you have lost equity in your home and can’t refi, I encourage you to contact them and ask for their help. Maybe if enough of the silent majority speak up, things will begin to change.
Mel
The Feds response was to do nothing, initially interest rates tanked on the news, however, by the end of the session rates recovered. Here is what was reported by the AP.
Eyeing inflation, Fed ends 9-month run of cuts
After two-day meeting, central bankers leave overnight rate at 2 percent
WASHINGTON - The Federal Reserve decided on Wednesday to leave a key interest rate unchanged and cited a heightened risk of inflation, which could lead to rate increases down the road. Private analysts said the Fed may delay the first rate hike until December.
The central bank announced that it was keeping the federal funds rate — the interest rate that banks charge each other — at 2 percent. It marked the first time in 10 months that the central bank has failed to reduce interest rates at one of its regular meetings.
In a brief statement, Fed Chairman Ben Bernanke and his colleagues cited both the threats to growth and rising inflation pressures as problems confronting the economy at the moment. They said the downside risks to growth “appear to have dimished somewhat” while adding that “the upside risks to inflation and inflation expectations have increased.”
The Fed action was approved on a 9-1 vote with Richard Fisher, president of the Fed’s regional bank in Dallas, casting a dissenting vote. Fisher objected to the action, saying he would have preferred an immediate increase in interest rates to fight inflation.
The decision to leave rates unchanged had been widely expected by financial markets. The Dow Jones industrial average staged a brief rally but then returned to around the level where the Dow was just before the announcement.
Economists said they believed Fed policymakers were seeking to assure markets that while they are watching inflation carefully, they do not feel an immediate need to start raising rates.
“They reaffirmed that there will be no further rate cuts and the next change will be a rate increase, but I didn’t see any special urgency about how soon that rate increase will take place,” said David Jones, chief economist at DMJ Advisors.
Jones said based on this statement it is likely that the Fed will keep rates unchanged until the December meeting while other analysts said they were not looking for any rate changes at least until the fall.
“When push comes to shove, we still expect Mr. Bernanke, student of the Depression, to prevail and keep rates on hold through the summer,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics.
Because of the Fed’s decision Wednesday, short-term borrowing costs on millions of consumer and business loans tied to banks’ prime lending rate will remain unchanged. The prime rate is currently at 5 percent, its lowest level since late 2004.
While saying that the upside risks to inflation have increased, the central bank repeated its forecast that it expected “inflation to moderate later this year and next year.”
The opposing forces of weak growth and recession put the central bank in a bind. Its main policy tool — changes in interest rates — can only address one of those problems at a time. The Fed can cut interest rates to spur consumer and business spending and economic growth or it can raise interest rates to slow spending and growth and ease inflation pressures.
From September through April, the Fed aggressively cut interest rates seven times. However, after a series of sizable rate cuts as the credit crisis was roiling global financial markets at the beginning of this year, the Fed at its last meeting in April reduced rates by a more modest quarter-point and signalled that the rate cuts could be coming to an end.
Even as Fed policymakers were meeting Tuesday and Wednesday, the economic news has continued to be bleak including a report showing that consumer confidence in June dropped to the lowest level in 16 years. Soaring gasoline prices, plunging home values and rising unemployment are all weighing on confidence.
Mortgage Bonds ended the day in positive territory so interest rate could improve tomorrow. A big interest rate mover will be what the Fed does at 2 P.M. Eastern time today. As I have mentioned in previous blogs, long term interest rates would improve if the Fed would make a token rate increase to the Fed Funds rate. It would help strengthen the dollar and send a message regarding the Fed being vigilant with inflation.
The big question is will the Fed have the guts to do it. Stay tune and we will see what happens today.
Keep in mind that the economy seems to continue to show signs of weakening. Pressuring Stocks lower was news from delivery giant UPS, which issued a profit warning. The reason this is of great concern to the Stock market and overall economy is because much of commerce is done through shipping giants like UPS, so less shipping means less sales and less sales means continued weakness in the economy. Of course, Bonds liked this news.
Consumer Confidence for June was reported at 50.4, expectations were 56.0. Just one more sign of a contracting economy.
This week's number one subject will be the FOMC interest rate decision at 2:15pm ET on Wednesday where it is widely expected that the Fed will hold the benchmark Fed Funds Rate at 2%, pausing after seven rate cuts that started in September. It is pretty much a lock that the Fed won't raise interest rates till after the November election, The Fed tries to stay neutral during Presidential elections. So Merry Christmas to rising interest rates. The 2-day meeting will begin tomorrow.
However, if the Fed would raise rates say a quarter percent, this action would actually be postive to long term interest rates. We would probably expect to see interest rates go lower. Especially since it seems that the European Union will start raising their interest rates in the next month. Other wise we will see the dollar retest it lows again. But nobody thinks the Fed would have the guts to do this, even a little.
Stock and Bond Traders won't place any big bets over the next two days ahead of the key FOMC Meeting on Wednesday. So the markets should be quiet till Wednesday.
Stocks are trading lower this morning and oil prices are on the rise giving Bonds a slight gain, Citigroup predicted today that they would have additional write downs due to subprime loans.
Oil prices have popped higher once again in response to news of a planned strike at a Chevron plant in war-torn Nigeria, Africa's largest oil producing nation.
Israel is conducting military operations to be prepared in case of a potential strike against Iran's nuclear plants. This is more posturing by the US and Israel to force Iran to the table and to keep them guessing when a strike will occur, if it is necessary.
The effect of the strike and Israel posturing pushed oil prices higher today. Frankly, the oil pits are just looking for reasons to push oil up. Their day is coming, because it will get harder to continue to sustain rallies. It seems each weekend some bad news comes out of Nigeria as another excuse to push oil prices higher. Who cares anymore.
From watching CNBC, it seems stocks, good stocks, are getting hammered. One commentator said he hasn’t seen the Wall this pessimistic since 9/11.
I don’t know about you but I am tired of all the cock and bull coming out of Washington and the Wall. There are too many smart people in these worlds. If they wanted to fix the problem, they could. It won’t be till the Silent Majority gets pissed (you and me) and starts to clean house. Next week I will give you information on how you can contact your political’s via email. Let them know you want change.
Mortgage Bonds have fallen 31 basis points by time the market closed today. Bonds were up and down all day long. Impacted by the drop in oil today and the stock market rallying based on this news.
In today's headlines, Initial Jobless Claims were released showing the number of Americans filing first-time claims for unemployment benefits fell last week, signaling a one week improvement in the labor market. Continuing jobless claims fell to 3.06 million, the lowest since April, but still well above the year-ago level of 2.52 million.
Adding to more inflation fears the Agriculture Department stated this morning, the price of cereals, baked goods, sweets and poultry will rise this year by more than expected a month ago because of accelerating costs for grain and fuel. The annual gain for cereals and baked goods will be 9% to 10%, up from 7.5% to 8.5% forecast in May and the most since 1980, this report will be released tomorrow.
Leading Economic Indicators (LEI) came in at a negative .1, estimates were for zero. The Philly Fed came in at -17.1, estimates were for -12. Neither report had much market influence.
Mortgage Bonds have dropped today, which means interest rates rose today.
The bond market continues to be held captive by inflation reports and stock market rallies.
Per CNBC this morning FedEx Corp reported earnings lower than market expectations, additionally, Morgan Stanley said quarterly earnings dropped significantly. Both of these reports have caused stocks to decline. Morgan Stanley reported that the ongoing credit crunch slowed investment banking and fueled trading losses. Mortgage Bonds are improving today based on this news. Hopefully bonds will continue to improve on yesterday's gains since there will be no economic reports today.
Our Bond Guru’s feel that after last weeks sell off , causing interest rates to rise dramatically, bonds may be reversing higher from an "oversold" state. This means that maybe interest rates will continue to fall from last weeks over reaction to various Fed governors speeches regarding concerns over rising inflation building in the economy.
My personnel opinion is that inflation concerns will start falling over the next couple months and gradually oil prices will begin to ease. I am hoping that the Fed will begin to buy back dollars shrinking available dollars in the economy which will have the effect of raising the dollars value in foreign markets. There is too much liquidity in the market due to the Subprime Mess.
What do you think will happen in the next couple of months with inflation and interest rates?
The Bond hit identical price lows on Monday and Friday, which tells us the Bond appears to be bottoming out. And even though prices were lower yesterday, the fact that the Bond never traded below Friday's lowest level, left us hopeful that the bottom would hold. It did hold and prices are bouncing higher so far today.
Producer Prices rose slightly more than forecast in May as higher fuel and food costs heightened the threat of inflation. The 1.4% rise in the Producer Price Index (PPI) was the biggest gain since November and followed a 0.2% increase in April. Core PPI excludes fuel and food and it increased 0.2%, matching economists' projections. The headline year-over-year PPI was 7.2%, compared with a 6.5% gain in the 12 months ended in April. Excluding food and energy, the increase was 3% from a year earlier, the same as in the prior month. The fact that the core PPI held steady at 3% year over year has to be comforting to the Fed, but 7.2% headline year over year number is steaming hot and has to raise some eyebrows.
The Commerce Department said Housing Starts set an annual pace of 975,000 units in May, in line with expectations, but the lowest since March 1991. The April starts figure was revised downward to 1.008 million from the 1.032 million originally reported. Building Permits were 969,000, slightly better than the 960,000 rate expected by economists. Overall the soft housing report gave Bonds a little boost.
Capacity Utilization and Production were both reported in line with expectations and the market reacted little as a result.
I am encouraged by this morning's bounce higher and will continue to carefully float. But be ready in case this fickle market takes a turn. I will be watching it for you.
After last week's sharp decline where Mortgage Bonds lost 181bp, prices are trading slightly lower so far.
In this morning's news, the New York Fed's "Empire State" Manufacturing index was reported at -8.7, lower than expectations of -2.0. The report, which has been volatile of late, had little effect on the Bond market.
Foreign investment in our markets remains healthy as the April Treasury International Capital (TIC) report showed Net Foreign Purchases were $115.1 Billion in April up from the March report that showed a net $79.6 Billion in foreign purchases. Long-term interest rates here in the US have remained relatively low, thanks in part to foreign countries continuing to buy our Bonds, including Mortgage Bonds.
Oil prices hit an all-time high this morning, just under $140 per barrel, despite an announcement by OPEC member Saudi Arabia that they will increase their oil production by 200,000 barrels per day from June to July. Saudi Arabia, the world's largest oil producer, is boosting production because they are concerned the high price of oil will lead to lower demand and a turn toward alternative energy sources...at least that is what they are saying.
Inflation in Europe accelerated to the highest level in 16 years last month to 3.7% as food and energy costs soared, intensifying what finance ministers said is becoming a "more complicated" dilemma. Inflation, even abroad, can negatively impact our long-term Bonds, like Mortgage Bonds, so we are following this very carefully.
Fed Chairman Ben Bernanke will be speaking at 10:00am ET and Fed President Jeffrey "The Dissenter" Lacker at 1:00pm ET and their comments could influence trading today. Interestingly, talks of tightening could actually help prices.
Technically, the trend remains lower, and fundamentally inflation here and abroad remains a concern. Over the past couple of weeks, we have issued several lock alerts, so hopefully your pipeline has remained protected. But now, Bonds are trading very close to the same low levels they reached last year, and just before prices mounted a recovery. On new transactions, I will carefully Float and see if prices can try to stabilize or improve - but as always, don't stray too far from the lock button in these volatile times.
After a lower open, Mortgage Bonds have reversed and are trading slightly higher. This reversal is happening at a floor of support underfoot and has formed a very bullish candle pattern. A look at the past two days trading has created a "Bullish Piercing Pattern", which if held through the day, can represent a signal that a reversal higher is in the works. You can always get a quick definition of candle patterns in the resources section of the member site, under terms and definitions - Japanese candlestick glossary. Additionally, a positive stochastic crossover from deeply oversold levels is also attempting to form. As a reminder, adjust your chart to reflect the 6% coupon.
The Consumer Price Index (CPI) rose 0.6% in May, a touch hotter than the 0.5% gain expected by economists. This represents the fastest pace in 6 months. The Core CPI, which excludes food and energy prices, rose 0.2% as expected. Overall headline CPI is up 4.2% on a year over year basis and has risen at a 4.9% annual pace over the past three months. This is clearly a reflection of higher oil prices. While headline inflation has been uncomfortably high due to the aforementioned soaring price of oil as well as higher food prices, core measures of inflation have barely budged...at least not yet. The core CPI is up 2.3% in the past year, and has risen at a modest 1.8% annual pace over the past three months.
Michigan Consumer Sentiment was reported at 56.7, below expectations of 59.5. Not a big surprise that consumers are a bit down in the current economic climate. Mortgage Bonds were helped by the weak number.
I am floating for now as I watch to see if the Bond does indeed form a bottom and reversal higher from here. But don't be too surprised if things change - We have seen a lot of volatility and it's not likely to slow.
After yesterday's heavy sell-off, Mortgage Bonds are bouncing nicely higher so far today on weakness in the Stock market. Oil prices continue to surge higher, causing Stocks to reach levels not seen since March, and sending money over into Bonds. Remember that after the close yesterday, there was a 31bp Bond Coupon Rollover, so we must factor in -31bp when looking at yesterday's candle, and the losses from each of the pricing windows from yesterday morning's rate sheet.
The only report due out today is the Fed's Beige Book, to be released at 2:00pm ET. The Beige Book is a gathering of "anecdotal information on current economic conditions" by each Federal Reserve Bank in its district. Most economists agree that economic conditions are generally soft across the country, with a few pockets of exceptional weakness and moderate growth. Additionally, there will be several Fed members speaking today, including Donald "Ice Cream" Kohn, Randall "The Black Hand" Krozner and Sandra Pianalto.
The last time Mortgage Bonds traded at these levels back in March, prices rebounded sharply higher, which can be seen on the Bond Page in a 6-month view. As I discussed in yesterday's Alert, after such a steep sell-off recently, Bond prices were overdue for a bounce higher. I am going to advise Floating, and see if the Bond can build on this morning's positive momentum.
Last night, in a speech in Massachusetts, Federal Reserve Chairman Ben Bernanke said "the latest round of increases in energy prices has added to the upside risks to inflation and inflation expectations". Bernanke's speech also suggested that the Fed is in no hurry to hike rates because of "slack" in the economy which can lower inflation.
Whoa! I could not disagree more with Mr. Bernanke. While there are risks to continued weakness in the economy, the answer is clearly not more rate cuts...it is rate hikes. The Fed should be in a BIG hurry to hike rates. I feel that the current 2% Fed Funds Rate is about 1% to 1.5% too low. Oil prices have skyrocketed since the Fed began the latest rate cutting cycle. This is because lower rates in the US weaken the Dollar. Oil is priced in Dollars, so as the Dollar weakens, oil prices climb. Last Friday, talks of rate hikes in the Eurozone sent the Euro higher and Dollar weaker, and oil spiked $5 quickly.
Should the Fed finally figure things out and hike rates, the Dollar will strengthen, oil prices will drop back towards $100, inflation will ease, and as a result...mortgage rates will decline. Let's see how long it takes the Fed to understand this.
Adding to the Fedspeak, was Richard "Loose Lips" Fisher talking a bit about the weak US Dollar and offered this comment earlier today, "We are witnessing a negative feedback loop ... which is that a weaker dollar can lead to further inflationary pressures which in turn leads to a weaker dollar, et cetera, and to dampened economic activity". While Loose Lips has been a bit wild in past remarks, we think he is spot on here.
As mentioned, the key component to the market malaise lately is inflation. Prices may drop a bit further to test support at the $98.15 level, but we think this level will hold. Additionally, the Bond is oversold. I will float here and see if the talk of a potential Fed hike gains momentum with other Fed members.
The market choppiness continues along a downward slope since prices broke below the 200-day Moving Average floor.
New York Fed President and voting FOMC member Timothy "Bobo" Geithner is scheduled to speak at 12:15pm ET and at 1:00pm ET, our pal, Dallas Fed President Richard "Loose Lips" Fisher grabs the limelight with an appearance on CNBC. There's no telling what inflation-hawk "Loose Lips" will say on national television so stay tuned as the bond market could react to his words.
The Bond Market has been under selling pressure of late because of inflation, not just here, but globally as well. Tonight at 8:15pm ET, Fed Chairman Ben Bernanke will speak on inflation at a Boston Fed conference today. Last week, Big Ben sent the Stock market lower when he said the increasing evidence the public expects prices to rise is a "significant concern'' for the central bank. Both Stocks and Bonds hate inflation, so rest assured all the financial markets will be tuned in to his speech.
Speaking of inflation - the average price for gasoline in the US rose to an all-time high above $4.00 a gallon Sunday, following the spike in crude oil futures seen in the previous week. Goldman Sachs says that gas prices could reach $5.75 a gallon while the price for a barrel of oil could hit $200 in the next two years.
Some Good News on Housing - The Pending Home Sales Report for April rose 6.3%, far above expectations of -1.0%. This index is considered a leading indicator of existing home sales.
A look at the Bond page shows prices attempting to hold above a floor of support at the $98.59 level. A break below this floor and it is likely the Bond will drift towards the next floor of support at the $98.15 level, about 57bp beneath current levels.
Mortgage Bonds opened much lower this morning, but erased those early losses after the Labor Department reported that the Unemployment Rate jumped to 5.5% from last month's reading of 5%. The 1/2 point rise was the biggest increase since February of 1986, while the unemployment rate is the highest since October of 2004. Estimates were looking for a 5% rate. Although the jump in the unemployment rate is getting a lot of attention, remember that the rate was at 5.2% a month earlier. So while the change is negative, it is not as dramatic as the media is portraying.
The US lost jobs in May for a fifth month in a row as payrolls fell by 49,000 versus estimates of -60,000 after a revised upwards 28,000 decline in April. The economy has lost 324,000 jobs so far this year. The total revisions subtracted 15,000 Jobs previously reported for March and April. Overall, the job creations were better than forecast , but the big jump in the unemployment rate pushed Stocks much lower and gave a boost to Mortgage Bonds.
Oil prices are soaring to over $134 per barrel after comments made from European Central Bank (ECB) President Jean-Claude Trichet. Trichet signaled the ECB may raise interest rates and this caused the Euro to strengthen against the US Dollar. When interest rates fall in the US or rise in Europe, the Dollar weakens against the Euro and drives oil prices higher as investors and speculators buy commodities such as oil as a hedge against inflation when the Dollar is falling. Surging oil prices could negatively impact the both Stocks and Bonds.
Technically, the Bond is trading between support at the $98.59 level and a ceiling of resistance at the 200-day Moving Average, presently at $99.55. We can carefully float here, but be mindful, prices are already well off the best levels seen earlier today and may have a tough time improving much further. Be sure to follow the price windows on the Bond page as the price swings have been dramatic.
What a ride! Once prices broke below the 200-day Moving Average, they quickly dropped further to test the next floor of support. Once touching the support underfoot, prices have bounced back a bit from their worst levels.
This morning, the selling pressure on Mortgage Bonds continued on the heels of a better than expected Initial Jobless Claims Report, which showed 357,000 new claims, lower than 372,000 the market was looking for.
The Bank of England's (BOE) Monetary Policy Committee stood pat for the second month in a row, leaving its official interest rate unchanged at 5%. The European Central Bank (ECB) also left its key interest rate unchanged at 4%. The decision for the ECB and the BOE was widely expected by economists as inflation remains a threat to the economy.
At 10:00am ET Federal Reserve Vice Chairman Donald "Ice Cream" Kohn began testifying in front of the Senate Banking Committee on the state of the banking industry, while Philadelphia Fed’s "Three Swing" Charles Plosser speaks at 12:00 Noon ET. These speeches could have an effect on this already jittery market.
Jobs Report Strategy
Handicapping this month's Jobs Report is once again not an easy task. Yesterday's ADP report does suggest that tomorrow's number may be stronger than the 60,000 job loss the market is expecting. Initial Claims over the past two months have hovered near current levels, telling us the labor market is at least stable. This stabilization in the labor market may be confirmed by last month's loss of 20,000 Jobs which was better than expectations and far improved from the 80,000 job loss average seen throughout the first quarter of 2008.
I see Jobs coming in better than expected, which could add to the downward pressure on Bonds. I advise locking into this report.
Bonds opened higher this morning, but turned lower after ADP reported 40,000 new private sector jobs added in May. Once factoring in an additional 25,000 new government jobs, which are not part of the ADP number, the Report suggests Friday's official Jobs Report will come in around 65,000. But that would be far greater than the loss of 70,000 jobs in May that economists expect. The ADP Report has not always been a great indicator, so the numbers are taken with a "grain of salt". And we also know that the so called "official" Jobs number is susceptible to significant revisions. Tomorrow I will lay out myJobs Report strategy heading into Friday's release.
The Labor Department reported an up-tick in productivity for U.S. non-farm businesses. Productivity - defined as output per hour worked- rose at a 2.6% annual rate in the quarter, revised up from 2.3% in the earlier estimate a month ago. This is a big help on the inflation front, as more productivity can be derived without additional cost. And speaking of cost - Unit labor costs rose 2.2%, revised down from 2.3%, again good news for inflation watchers, as rising Unit Labor Costs can spark wage-based inflation. Overall this was a good report for Bonds.
The ISM Services was reported at 51.7, higher than expectations of 51.0. The news didn't move the markets much.
For today, I can continue to carefully Float but have your finger on the lock trigger. After a higher open, Bonds have dropped to once again revisit the 200-day Moving Average, a level it has touched each of the past 6 trading days. Friday's Jobs report could define the direction of Mortgage Bonds, either above or below this important threshold.
Mortgage Bonds are glued to the 200-day Moving Average. Prices had opened higher and above this important ceiling but have since pulled back to rest on this floor.
There are no economic reports scheduled for release today, so Bond prices will react to action in Stocks, Oil, the aforementioned technical picture and some speeches abroad. Currently speaking at a conference in Barcelona is Federal Reserve Chairman Ben Bernanke, European Central Bank President Jean-Claude Trichet and Bank of Japan Governor Masaaki Shirakawa, and their comments could have an effect on the market.
For now, we can carefully Float and see if Mortgage Bonds can free themselves higher from the 200-day Moving Average. But should prices drop back below this ceiling, I will likely switch to a Locking stance.
Mortgage Bonds are trying to bounce higher this morning, but prices will have to contend with a strong ceiling of resistance at the 200-day Moving Average, just above present levels.
Wachovia Corp.'s CEO, Kennedy Thompson, was removed by the Board of Directors effective immediately, after sub-prime losses cost the lender more than half of its stock value in the past year. Bank stocks in the U.K. are selling off as lender Bradford & Bingley issued a profit warning. As a result of this morning's news, financial stocks are leading the stock market lower and giving a slight boost to Mortgage Bonds.
The ISM Index came in at 49.6, are reading below 50 signal contraction in the economy. Home Bonds are up 44 basis points. Slightly above the 200 day moving average, hence Bonds are up.
Even though prices are slightly higher, we have to be mindful of the high volatility and tough ceiling of resistance at the 200-day Moving Average. Our bias continues to be a locking one, with the 200-day MA just overhead.