Risks favor: Carefully Floating

Current Price of FNMA 5.5% Bond: $99.53, +9bp

The battle at the 100-day Moving Average resistance level continues. Yesterday, the Bond soared above this ceiling early in the day only to be pushed lower to close beneath this lid. And this morning, prices were trading a whopping 28bp higher before the Bond once again retreated back below this strong ceiling. This type of trading action tells us the 100-day MA is a strong resistance level and may be prevent the Bond from improving much further.

There are no economic reports scheduled for release today, but hold onto your hat, because at 1:30pm ET today, Dallas Fed President and voting Fed member Richard 'Loose Lips' Fisher is scheduled to talk. You may recall that it was Fisher’s concerning inflation comments back on February 7th which completely shook the Bond market and ignited a multi-week sell off in Bond prices. On a day with no news, should he uncontrollably blurt out any more strong words on inflation, the market may move more sharply than usual.

Yesterday’s alert avoided some midday lender re-pricings and worse pricing this morning, but on new transactions, we can carefully float and see if the Bond can break above resistance at the 100-day MA. We can’t overemphasize how volatile and quickly prices have been moving, so keep a finger near the lock trigger. Should prices be forced lower, the next clear floor of support lies at the 200-day MA, presently a big 118bp beneath current levels.