Locking Bias

Stocks opened lower with the Dow down 70 points.  Economic reports included Initial Jobless Claims, which were lower than expected, the Philly Fed index manufacturing survey, which was better than expected, and Existing Home Sales, which was just under estimates. Overall, a decent day of news.  Yet somehow, the small country of Cyprus is distracting the markets as their government decides between a bailout form the EU that taxes bank deposits, or a bailout from Russia with unknown repayment terms.  Banks are closed until next week, but it most certainly will cause a run on the banks when they do open.  Even though Cyprus is a small country with a small GDP, the proposed terms of repayment sets the tone for other European countries that might have financial issues.  Europe’s drama is far from over and will continue to spook the markets for a while. mortgage bonds moved lower yesterday after the Fed announcement, but there were no real surprises.  The move down was right within the prevailing downward channel, so we will maintain a locking bias on short term transactions.