Update 6/14/10
Current Trend Direction: Sideways in a Wide Range
Risks favor: Carefully Floating
Current Price of FNMA 4.0% Bond: $99.53, -19bp
Mortgage Bonds are starting the week lower, as the credit woes out of Europe have eased a bit…at least for the moment. The Euro is attempting to stabilize from its recent decline and now hovers near $1.22 against the US Dollar, which means it takes $1.22 USD to buy 1 Euro. The Euro had dipped below $1.20 in recent weeks. This positive move in the Euro was sparked by some good economic reports out of Europe, which has also helped propel most of their Stock markets higher…and this is coming at the expense of Bonds. A look at the Bond Page shows that Bond prices were pushed back lower from overhead resistance last Wednesday, and currently remain beneath this tough ceiling.
There are no economic reports due for release today and there are no Treasury Note auctions this week, so today’s trading will likely be influenced by Stocks and any breaking news out of Europe, as well as the aforementioned technical signals.
St. Louis Fed President James “Raging” Bullard, a voting member in 2010, was in Japan this morning saying that the European crisis should not cause the Fed to postpone raising interest rates as the US economy recovers. He went on to say that “While the sovereign debt crisis in Europe is indeed a serious matter, the global recovery at this point looks very strong, and seems unlikely to be derailed.” As we discussed in Friday’s Update, Mr. Bullard is part of a group of Fed Members who have expressed concern about the present accommodative policy and the need to hike rates sooner rather than later.
We can start the day by Carefully Floating, while paying very close attention in this volatile environment.