12 Aug Floating Bias
Markets opened to a relatively quiet day with a continuation of last week’s pressure on the stock market. This is continuing to help bonds push higher, with the 50 DMA as the next potential resistance level just 20 bps higher. There are no economic reports today, but the rest of the week is full of information that the Fed and other investors will be sifting through to determine the latest pulse of the economy. Retail Sales, PPI, CPI, the Empire State Index for manufacturing, Housing Starts, and Consumer Sentiment will all be reported throughout this week. Stock investors keep flinching, as the reality of QE ending is closer, although still without a definitive date. mortgage bonds have recouped roughly 230 bps since hitting multi year lows on the 5th of July. That is the equivalent of interest rates moving lower by an average of .375%, and up to .5% in some cases. With prices trading between the 25 and 50 DMA, we will start the week with a cautious floating bias.