Maintaining our locking bias

The big news of the day will come at 12:00 p.m. MST, when the Fed will make a statement.  Since there is not a press conference to follow, we don’t anticipate any real surprises.  The markets will be looking for any hint of when they will be increasing the Fed Funds Rate.  However, with inflation well below their target, oil prices at insanely low levels and a continuing strengthening dollar, an increase to the Fed Funds Rate anytime soon is becoming less likely.  The strengthening dollar is already serving a similar role to the Fed tightening their policies.  For one, a stronger US dollar will reduce exports as the price to purchase US goods increases to foreign buyers.

The stock market is rebounding this morning on the heels of a blockbuster earnings report from Apple.  It was reported that iPhone revenues alone totaled $51.18 billion in the 4^th quarter of 2014!  This was larger than Microsoft and Google’s 4^th quarter revenues combined.  Boeing also reported stronger earnings, which is adding additional boost to the stock market.  With the massive influx of foreign money into the US markets, US company’s’ stock prices are well supported at the moment.

The 10 Year Treasury Note Yield is again above the critical 1.78% level.  Although we feel the yield will fall in the near future, this makes it more difficult for rates to move lower in the near term.  Combined with mortgage bonds remaining at the top of a trading channel, we will maintain our locking bias.