FNMA 4.0% bond actually tanked today. I have been watching for that as the bond has been really oversold. Rates went UP this afternoon. The bond ended the session down 34 bps at $100.44...and was down MUCH lower than that for some of the session. The T-note auction today was received very well...and investors saw it as a sign to put money back into bonds later in the session. This is what saved us from further rate increases this afternoon.
Generally, when we see money going from bonds, we see it going to somewhere. I am sure someone wiser could tell you where...but I don't see it.
I can tell you where it is not:
The Dow was beat-up today and off 145 points at the bell to close at 10,152. Remember the Dow is only comprised of 30 stocks, but they are a pretty good cross section to watch.
Gold was actually DOWN a buck to $1245.00 and Oil was UP but only by 6 cents to $76.57
Today's lows could potentially be just profit taking. Many investors preserve their profits by selling when the market is high or have computer programs to sell for them when the market reaches a certain point on investments they set. They can then park their money somewhere until the market bottoms and then invest again. (Short selling is employing this strategy in a sense where they sell today with a guarantee to buy a stock back after a specified time at whatever the market value is.) This activity can cause pretty massive downturns as so many sales orders are put in at once when things get oversold as they have been in the bond market...which deteriorates the bond market.
Why? Supply vs. Demand. With the added "supply" in the form of sale requests, the scale moves toward the over supply side vs. demand and value deteriorates.
Look for higher rates tomorrow potentially as we may see a higher than expected consumer sentiment report and if the final read on the GDP is higher than initially reported money will move further out of bonds. If these numbers are in line: we could actually see a bounce in the market...and rates could hold.
Cheers!
Chad
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Chad Schauers
Montana Mortgage Lender, Bozeman, Montana
Personal Cell: 406 799 8613
Personal Email: metchad@gmail.com
