Recovery in the bond market today!

FNMA 4.5% bond actually came UP to $99.72 after GAINING 53 bps today.

Rates DOWN to the 5.25% range again on the 30 year fixed notes.

We had a WEAKER than expected retail sales report to add fuel to the bond rally...and an "A" rated note auction this afternoon.
Remember that when people perceive that "others" are investing in bond investments: they do it too.
When investors sense that there is a need for "relatively" safe places for their money: they put money into
investments like mortgage backed securities, t-notes, tips etc.

ALSO today we saw the fed report of spending in the Mortgage Backed Securities Market.
Looking directly at the spreadsheet today we can see that the purchases were mostly concentrated in the 5% and 5.5% bonds...
these support mortgage rates in the 5.5%-6% range.

Interesting to note that as the markets drive rates lower than that: the mortgages backed by the
5.5% and 6% coupons are refinanced and the feds recover their investment more quickly.
That is maybe oversimplified...so someone correct me if I am wrong.

They are mostly buying 30 year coupons...to see the report: http://www.newyorkfed.org/markets/mbs/


Germany and France reported slight growth this morning...and we saw better than expected numbers
from Wal-mart...even though they were flat.

Dow UP 36 to 9398 points...

Have a great eve!

Chad
www.metchad.com