Wow! Rates got better twice today leaving things in the low 5% range for rates.

FNMA 4.5% actually bumped up 69 bps to $100.25 and crossed over the 200 day, 100 day and 50 day average pricings that were ceilings for the bond pricing before.

Bernanke gave a speech today suggesting that they will do everything in their power to control inflation and didn't paint as rosy a picture as some analysts have been painting recently.

Interesting thing about inflation: it is bad news for both stocks and bonds. Inflation indications tend to push investors over to inflation protected investments and away from stocks and bonds.

Inflation protected investments usually have a lower rate of return than an investor can typically earn with other types of investments. So: news that inflation will be controlled along with continued anticipation of the need for relatively safe places to put money keeps money in bonds.

In contrast to the logic above however: the Dow was up 68 points as good earnings reports from Caterpillar and Coca-cola provided encouragement to the more optimistic investors. We have seen improvement in the Dow for 9 out of the last 10 sessions and are back up close to 9000 points again. Remember that GM was replaced by Cisco systems in the "mix" of 30 stocks as well as one other substitution. (The Dow is a composite number taking the share price vs. available shares for the 30 companies that are a part of it who represent a broad cross-section of the US economy.)

Have a great eve,

Chad