Friday, October 22, 2010 5:45 PM ET
By John Sauro
Mortgage Bonds Repeat Last Friday’s Losses
Bonds moved lower, which pushed mortgage rates a bit higher today. However, the good news is that Bonds stayed above the 25-day moving average, which they have done for the past month.
Bonds declined as investors cashed in profits ahead of the weekend and on the news that the Treasury will be selling $109B in government debt next week. The benchmark 3.50% coupon fell 22 basis points at $100.94.
Quantitative Easing Update
St. Louis Fed President James Bullard said yesterday that the Fed may want to purchase Treasury Securities in $100B monthly increments to improve conditions. Mr. Bullard is now the third source to say the Fed will purchase $100B a month, in just the past 48 hours. It appears the Fed is preparing the markets ahead of any formal announcement, as not to shake up the markets. There has been speculation that the Fed intends to buy $500B worth of US Treasuries over 6 months.
I recommend carefully floating, not locking into mortgage rates, as we take direction form both the Bond and Stock markets.