Cautious float

Mortgage bonds bounced higher this morning as support proved to be sufficient to keep rates from moving up.  The stock market again flexed its muscle, closing at all-time highs yesterday.  Both markets have been performing well the past few weeks, with both stocks and bonds off to a good start as we begin the day.

Retail Sales for April were reported this morning, showing up 0.1%.  When you strip out auto sales and gasoline, Retail Sales were down 0.1%.  This is a soft figure, and well below last month’s 1.5%.  The strength of March’s report makes April appear to be worse than it actually was.  The robust figure in March likely took away from purchases that would have happened in April, and it made a gain more difficult because the bar was already set at a high level.

The National Federation of Independent Business (NFIB) reported that optimism among small business owners increased nearly 2 points, moving from 93.4 up to 95.2.  This is the best report since 2007, and higher than expectations of 94.5.  Most importantly, the report showed an anticipation of increased hiring in the future.  This is a positive indication as we move into the warmer months of summer when the economy generally performs better.  As the weather thaws, economic conditions are expected to heat up.

With mortgage bonds bouncing off of support, we suggest cautiously floating to see if we can regain the losses of the past couple weeks.  If you choose to float, watch the markets closely as things can change quickly.  We are approaching overhead resistance that may push bonds lower.  Should that happen; we will change to a short-term locking bias.