Mel's Blog

Bond prices are trading lower and are following through on the negative technical signals seen last week.  This trend will likely worsen throughout the day, as stocks appear headed higher and there are no economic reports scheduled for release.  

The calendar will heat up a bit later this week, but the main event happens Wednesday afternoon with the Fed Meeting and Policy Statement.  Bond traders won’t be too anxious to place any large bets one way or another until they get a chance to hear the Fed’s Policy Statement.  While the Fed may make mention of the recent troubles facing the mortgage industry with subprime lending, don’t expect them to bail out the financial markets with a cut in interest rates any time soon.  Battling inflation is still the Fed’s number one job, and inflation currently remains above the Fed’s comfort zone of 2% with the Personal Consumption Expenditure (PCE) Index above 2% with the Core PCE at 2.3%.  

Technically, bond prices are trapped between a ceiling of resistance formed by a rising Lower Trend Line at $99.38 and support provided by the 25-day MA at $99.07.