Mel's Blog

Mortgage Bonds are just slightly higher as traders wait to hear what Fed Chairman Bernanke says before Congress this morning at 10:30am ET.  His assessment of economic growth, inflation and Fed monetary policy could have an impact on trading.  There is a possibility that Big Ben will address the recent string of slowing economic reports, higher Initial Jobless Claims, as well as the potential problems from the sub-prime fallout.  If Bernanke leans towards a potential ease later this year Bonds could see an improvement.

Durable Goods Orders for February was reported at 2.5%, which was worse than expectations of 3.5%.  The lower than expected Durable Goods Orders sparked only a mild improvement in Bond pricing as traders also contend with higher oil prices.  The escalating tension in Iran over the past couple of weeks has pushed oil prices back up near $65 a barrel this morning.  Higher oil prices brings fears of inflation, and Bonds hate inflation.  

So while this morning's weaker than expected Durable Goods gave prices a modest boost higher, the gains are being tempered by escalating oil prices and anticipation of Bernanke's remarks to Congress.   

Bond prices remain in a tight range between resistance at the 25-day Moving Average at $99.19 and support at the 100-day MA, presently at $99.01.  We advise cautiously floating into Bernanke's testimony as prices remain above a solid support level.