YO!
Feds dropped the bomb today on the bond market rally. Announcement that they will be auctioning off another 104 billion dollars worth of T-notes next week gave investors the feeling that the added supply will deteriorate pricing on mortgage backed securities.
The selling left the FNMA 4.5% bond DOWN 119 basis points today and the 30 year fixed rate is back in the 5.5% range.
The SPIN: Continuing unemployment claims fell by 148,000 people (meaning 148,000 people are no longer receiving unemployment benefit...) and the news spun that into some really "great news".
It has been touted as the "BIGGEST ONE WEEK DROP" since November 2001 and mentioned as another "signal of recovery."
***However no one really seemed to mention that much of this is possibly due to the fact that unemployment benefit has ENDED for thousands of people who signed up for unemployment several weeks ago. It was also not mentioned that 608,000 people signed up for unemployment last week which came out in the "initial unemployment claims" reported today.
Remember that it is ALL perception. Expectation comes from that...and investment IS ALL ABOUT EXPECTATION.
So: we may see some bounce tomorrow as the truth sets in for investors and rates could stabilize or get a little better in the next week.
Interesting: Feds bought LESS bonds this week than they have been. According to the report put out this morning (every Thursday) the NY Fed only purchased $20.29 billion. The "organic" reaction to the market was what was driving the purchasing of Mortgage Backed Securities early this week...and profit taking yesterday that drove prices. Today however: it was the spin in the news among other factors.
DOW gained just 58 points. Where is the money going? HUGE pull out of bonds, Commodities appear to be stable, Dow didn't see huge gains today. Some say there is still 2.5 TRILLION dollars of "Mattress money" out there...
There was some good economic news which always encourages investors to pull out of the "safety zone" provided by bonds...but with such a HUGE sell-off...we can usually see where the money is going. If anyone knows...let me know.
Have a great eve!!!
