Locking bias

Mortgage bonds are slightly positive and stocks are down as we begin the last Monday of 2015. With only three trading days to follow in 2015, the markets are struggling for direction. According to data collected by Bianco Research and Bloomberg, 2015 is one of the few years when the major investment classes all experienced a year of very little returns. In fact, if you judge 2015 by which investment class generated the largest return, a case can be made that it was the worst for asset allocating managers in nearly 80 years. Wit just three days remaining in the trading year, the S&P 500 is up just 2.2% including dividends, cash is up less, and bonds and competitors are both down. This is a significant change considering that since 1995, nearly every year has had one of the earn at least a 10% return.  This is largely a result of the Federal Reserve taking away stimulus programs that have helped fuel greater investment gains.

Today is a slow day for economic reports, and a relatively quiet week overall.  Bonds were able to stay above support and have regained some of their losses since Wednesday.  The strength of support beneath bonds has proven to be very strong, which has prevented mortgage rates from creeping higher.  The 10 Year Treasury Note yield has also been able to remain below resistance and is currently trying to break beneath its 25 day moving average.  The 2.22% yield has been a tough level to break beneath.  However, the 10 year yield is now challenging that critical point.  If it is able to break below this level, we could see mortgage bonds improve further as a result.

With bonds now capped below resistance, we will maintain our locking bias.