09 Feb Again, you will want to closely watch this market
The upward trading pattern in the mortgage bond market that has been in place since December 30th is continuing to hold. This is also true for the 10 Year Treasury Note, which now has a yield of only 1.7%. In the past two years, this yield has been as low as 1.624%. It is beginning to look as if we could match the 2-year low at some point in the near future. However, a break below the 1.624% mark would be challenging and difficult to predict. Yields could very well move higher after touching this level. Therefore, we need to be mindful that rates could be nearing the lows we will see them in the near term. We should prepare for increased volatility.
The National Federation of Independent Businesses (NFIB) released their latest Small Business Optimism Index. It came in with another disappointing reading; in fact, the worst in almost two years. Business owners stated that taxes and regulations, along with difficulty finding qualified workers, were their biggest concern. With the Unemployment Rate now below the critical 5% level, and with tax time just around the corner, it is no surprise that business owners are feeling pinched. Especially the ones who spend their earnings throughout the year without consideration of tax payments which should be saved to pay the IRS by the April 15th deadline.
With bonds maintaining their upward channel, there is no need to rush and lock at the moment. Therefore, we will maintain our floating bias. However, be mindful that sentiment can reverse quickly. So if you choose to float, do so only if you are able to watch for movement in the markets closely.