16 Oct Bonds are feeling the pressure of stocks
After a failed attempt to make a break above the 100-day moving average, mortgage bonds are moving lower. Bonds are feeling the pressure of stocks, which are again looking to set new all-time high records. Further, the tensions between Iraq and the Kurds are causing oil prices to move sharply higher. Since higher oil prices are a forward indicator of future inflation, this is causing concern for bond holders who despise the idea of inflation. Since bond payments reflect a fixed income, higher levels of inflation reduce the “real” return of a bond. That is why mortgage interest rates will move higher as inflationary pressures heat up.
In addition to stocks, Bitcoin is once again on a strong tick higher. The crypto-currency market has taken investors by surprise, with many financial advisors now suggesting a typical investor to hold as much as 5% of their net-worth in this new type of investment. With prices soaring higher, many are jumping on the band-wagon. However, keep in mind that the graphs of Bitcoin are looking eerily like the dot-com bubble stocks prior to the bust. Regardless, it seems it will either be a big hit for many investors or it will crash. Something worth watching.
With bonds failing to break above resistance, we will maintain our locking bias.