Risks favor: Carefully Floating

Current Price of FNMA 5.5% Bond: $99.78, -22bp

It’s another wild ride so far this morning, but these days, we’d be surprised if it wasn’t. Bonds have been extraordinarily volatile, which can be a bit stressful. However, remember to use this to your advantage, as your competitors without this information are left scratching their heads…while you are able to help your clients and referral sources through these crazy times.

Mortgage Bonds opened a whopping 56bp lower than yesterday’s close, but cut their losses in half as they attempt to stabilize. The reason for the negative open was inflation concerns from around the globe – it’s becoming a smaller world, that seems to be more interconnected every day. Oil prices remain stubbornly high, while food prices have increased at an alarming rate. These inflationary pressures are creating some stiff headwinds for Bonds.

The University of Michigan Consumer Sentiment for March was reported at 62.6, which was just slightly below expectations of 63.2. The market did not react much to the news.

After this week’s relatively slow economic news calendar, things really heat up next week with many potential market moving reports, including the Fed’s favored gauge of consumer inflation, the Core Personal Consumption Expenditure Index (PCE) on Thursday, and Friday’s important Jobs Report, where early estimates are for a loss of 80,000 jobs. Plus, on Wednesday the Fed will announce their interest rate decision. At the moment, the Fed Fund Futures are pricing a 75% probability of a .25% cut to the Fed Funds rate.

Much like yesterday, this morning we woke up and saw considerably worse pricing right out of the gate. The Bond is now trading between the 50 and 200-day Moving Averages and will likely take their direction from Stocks.