Risks favor: Cautiously Floating
Current Price of FNMA 6.0% Bond: $98.97, +6bp
On the heels of last week’s full slate of economic events, the schedule this week will be fairly tame by comparison…that is, until Friday’s monthly Jobs Report arrives. The labor market has remained incredibly tight, which is one of the reasons the Fed isn’t anxious to declare that inflation is completely controlled just yet – so the report will be of interest, and as always, could be a market mover.
In the meantime, today brought only the Institute of Supply Management (ISM) Index, giving a read on the health of the manufacturing sector. It came in stronger than expected - and actually at the highest level in 14 months. Stocks seem to like the strong news, although Bonds have had little reaction.
The technical picture has been very exciting lately, as Bonds battle out a “squeeze play” between the strong Falling Resistance Line and support just below. For now, Bonds have popped just above the Falling Resistance Line – and while this is good news, we’re not yet convinced that the move is permanent. Although the week ahead lacks a fat economic schedule, the midweek Independence Day holiday can lead to increased volatility due to light trading volume, combined with Trader's nagging fears of terrorist action surrounding our patriotic holidays. For now, we’ll continue to Float, as we watch to see if the Bond can retain its position above the Falling Resistance Line.
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