Cautiously Floating

The Jobs report was virtually right in line with estimates and the Unemployment rate stayed consistent with last month’s upwardly revised rate of 7.8%.  Stocks have remained almost flat, with the Dow moving within 10 points this morning.  The big news for the bond market was yesterday afternoon when the Fed minutes were released.  The report showed that some members were in favor of ending QE3 before 2014.  This spooked bond traders, causing mortgage bonds to sell off and break below support that had been in place since September.  What many forgot so quickly was the Fed stating that QE buying would continue as long as the Unemployment rate was above 6.5%.  Based on the jobs figures, that is quite a few years away.  Still, the sell-off did push interest rates higher.  With the Fed buying mortgage bonds, we will look for prices to find support as bonds are oversold.  We will start the day with a with a cautious floating bias.