Locking bias

Oil prices continue to fall and are now below $37 a barrel.  This was a topic we discussed heavily earlier in the year.  Since oil prices are strongly impacted by the strength of the US dollar, the imminent rise in the Fed Funds interest rate is helping to drive the dollar higher which presses oil prices lower.  This dynamic often pushes the stock market lower and helps reduce mortgage interest rates.  This is in play so far today.  However, bond traders are not yet willing to take too much risk ahead of the Federal Reserve rate hike that is nearly set in stone for next week’s Fed Meeting.  If it wasn’t for the fear added by the Fed, mortgage rates would likely be even lower than they are today.

The November NFIB Small Business Optimism Index, which measures the mindsets of small business owners across the country, fell to 94.8 from 96.1.  Since this was the 2^nd lowest number in almost two years, there is reason for concern.  The components within the report that fell the most were “Expected Real Sales Higher” and “Expected Economy to Improve.”  Both of these were down 3%.  The chief economist for NFIB, Bill Dunkelberg, went off on a rant about his dissatisfaction of the current president and the overall economy.  It was clear from his comments that many of the businesses he represents have anger and frustration within the market.  Overall, this doesn’t bode well for a strong holiday shopping season.

Bonds are near the top of a tight trading range.  We will maintain our locking bias.