20 Jun Cautiously floating
The Dow is lower by 200 points at the moment, thanks to the all but subtle delivery from Fed Chairman Ben Bernanke yesterday. Investors were left with virtually every approach, except a clear and definitive exit for QE3 when all was said and done. So much for calming the markets… First there was talk of no tapering, then plenty of talk on tapering based on optimistic economic data. Investors showed their support by selling off everything. Stocks, bonds, and commodities are continuing the sell off today. mortgage bonds plunged yesterday, which was a clear break of the support they were so desperately clinging to. This moved has pushed interest rates higher, and the best case low cost 30 year scenario into the 4% arena. mortgage bonds gapped down this morning, but have since pared a good portion of their losses. Initial Jobless Claims were higher than expected, helping to limit the losses in the bond market. The slowing of loans going to market along with the rapid move higher in rates changes the supply and demand drastically, and that may be the silver lining in all of this. Should equities continue to lose some of their luster, we could finally start to see a real turn around in an oversold bond market. As long as we stay above current support levels, we can start new transactions with a floating bias.