Risks favor: Floating

Current Price of FNMA 6.0% Bond: $101.12, +3bp

Mortgage Bonds are currently trading at their best levels of 2007 at $101.12. While this is good to hear, the bond touched this exact same high about a month ago and was turned lower. Back on October 24th and 25th the FNMA 6% Bond hit $101.12 as a high both days before heading lower – eventually prices dropped 70bp over the next two weeks. Will Bonds suffer the same fate this time around? Much depends on the news of the week, but the stage will be set by how the Bond reacts to the current battle between the Bulls and Bears over the current ceiling. Bulls attack with horns in an upward motion – that’s why a move higher is called “Bullish”, and Bears attack with claws in a downward motion – hence the name “Bearish”. Currently, Bond Bulls are trying to break through the ceiling, while the Bears are trying to hold the line and push Bonds back. Let’s see where the Bond closes and who wins the battle – it can tell us a lot about the direction of prices this week.

Early indications show last Friday, also known as “Black Friday”, retail sales were stronger than expected. This is a good kick-off to the Holiday shopping season. And tomorrow the Consumer Confidence number will give us some indication of how the consumer feels going into this important time for the retail sector.