Nickajack Angler
Well-known member
"AH SUGAR...AH HONEY HONEY" The Archie's made this the top song of 1969, and in fact, it was the only song recorded by a fictional band to ever reach #1. And like a child who has been overloaded on candy, Bonds have been "bouncing off the walls", and appear all "sugared up".
Bond prices and home loan rates swung wildly all of last week. Mortgage Bonds bounced around so dramatically, that home loan rates changed as much as a quarter percent during a single day, on two separate occasions last week. After all the exhausting action, home loan rates worsened by about 25% for the week overall.
Bonds hate inflation because over time, it erodes the purchasing power of the fixed of return they provide. And when consumer inflation was reported at its highest level in years, Bonds were hit hard. But some weak data on both Housing and Manufacturing, along with some sweet comments from the Fed, helped pour some sugar on Bonds as they rallied back and improved.
But wait...just when you thought the party was over, Mr. Excitement, Dallas Fed President and voting FOMC member Richard "Loose Lips" Fisher grabbed the stage. A known inflation hawk, who often blurts market moving comments in an almost uncontrolled fashion, "Loose Lips" lived up to his wild reputation by roiling the Bond market with warnings about inflation and the credit markets.
Forecast for the Week
If you like economic reports with the letter "P"...this is your kind of week. PPI, a measure of wholesale inflation will be reported along with PCE, which is the Fed's favored measure of consumer inflation. Additionally, GDP, and the Purchasing Managers Index will give us a look at the strength of the economy. Also in the mix are potential market movers like Durable Goods and Existing Home Sales.
A look at the chart below shows how the Bond has been bouncing off the walls of the 100 and 200-day Moving Averages. It is likely that this pattern will continue amidst all the economic data to be released. And because the range between these two boundaries is so wide, there will probably be more huge price swings ahead.
Chart: Fannie Mae 5.5% Mortgage Bond (Friday Feb 22, 2008)
Bond prices and home loan rates swung wildly all of last week. Mortgage Bonds bounced around so dramatically, that home loan rates changed as much as a quarter percent during a single day, on two separate occasions last week. After all the exhausting action, home loan rates worsened by about 25% for the week overall.
Bonds hate inflation because over time, it erodes the purchasing power of the fixed of return they provide. And when consumer inflation was reported at its highest level in years, Bonds were hit hard. But some weak data on both Housing and Manufacturing, along with some sweet comments from the Fed, helped pour some sugar on Bonds as they rallied back and improved.
But wait...just when you thought the party was over, Mr. Excitement, Dallas Fed President and voting FOMC member Richard "Loose Lips" Fisher grabbed the stage. A known inflation hawk, who often blurts market moving comments in an almost uncontrolled fashion, "Loose Lips" lived up to his wild reputation by roiling the Bond market with warnings about inflation and the credit markets.
Forecast for the Week
If you like economic reports with the letter "P"...this is your kind of week. PPI, a measure of wholesale inflation will be reported along with PCE, which is the Fed's favored measure of consumer inflation. Additionally, GDP, and the Purchasing Managers Index will give us a look at the strength of the economy. Also in the mix are potential market movers like Durable Goods and Existing Home Sales.
A look at the chart below shows how the Bond has been bouncing off the walls of the 100 and 200-day Moving Averages. It is likely that this pattern will continue amidst all the economic data to be released. And because the range between these two boundaries is so wide, there will probably be more huge price swings ahead.
Chart: Fannie Mae 5.5% Mortgage Bond (Friday Feb 22, 2008)
