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.