13 Aug Locking Bias
As investors contemplate Europe’s ongoing crisis, markets are starting the week with stocks lower and mortgage bonds slightly higher. Spain and Italy are the headlining concerns with their public debts hitting record highs while their economies are in deep recession. While the ECB will buy their bonds for now, Italy’s debt is rated at approximately 123% of its economic output. Many investors are skeptical that a bailout is eminent, but there is still too much unknown for any level of confidence in the region. Adding to the global slowdown fear, Japan (ranked as the 3rd largest world economy) reported a lower than expected 2nd quarter GDP. There are no U.S. economic reports today, but the rest of the week has a full schedule. We will stay with a locking bias for short term transactions.