Very cautious float

Very cautious float

Markets are starting the week with a move higher for both stocks and bonds.  The economic calendar is empty until Thursday and Friday, with Initial Jobless Claims, PPI, and Consumer Sentiment being reported.  Bonds are following through on Friday’s turnaround, which was driven by the disappointing jobs report and continued uncertainty about Syria.  The Dow is just above 15,000 this morning on positive economic reports from Asia.  Starting tomorrow, the bond market has $65 billion in auctions to contend with this week.  mortgage bonds are approaching the top of the trading channel, which is getting smaller every week due to the descending trend lines.  This has proved to be resistance since mid-May.  Therefore, if prices move much higher, we will advise switching to a locking bias.  We can start with a cautious floating bias for now, as long as the momentum in bond prices continue.