Monday, July 9, 2007
Current Price of FNMA 6.0% Bond: $98.44, +12bp
"Success is how high you bounce when you hit bottom" General George S. Patton. While Mortgage Bonds are bouncing a little higher this morning, further success may be limited as prices are now trading just beneath a tough ceiling at the Falling Resistance Line.
No economic reports of interest are due today - but second quarter earnings season for the stock market kicks off, with earnings reports from Alcoa and Pepsi. Other major corporations reporting this week include Yum! Brands, Genentech, M&T Bank Corporation, Marriott International, and General Electric.
Analysts are predicting a 4.1% growth in earnings from the S&P 500 corporations in the second quarter, down from the first quarter’s 7.9% rate. So if earnings end up surprising to the upside, coming in above the projected 4.1%, stock prices could move higher, adding to their present lofty levels. And if this happens, it could pressure Bond pricing lower, as Stocks and Bonds compete for the same investment dollar. But if earnings disappoint, we could see a correction in the stock market, which could benefit bond prices. We will be keeping an eye on the earnings reports of the major corporations and monitoring how the financial markets react.
The Bond is now nestled up against the Falling Resistance Line, and in order for prices to improve further, the Bond will have to get rough and make a move to break above this tough ceiling. And even if the Bond does overtake this resistance level, the 25-day Moving Average lurks just a bit further overhead, which forced Bonds lower just last week. While an overall bias towards Locking remains prudent, we will carefully Float for now. Bonds are currently higher, so let's give pricing a chance to break through resistance.
"Success is how high you bounce when you hit bottom" General George S. Patton. While Mortgage Bonds are bouncing a little higher this morning, further success may be limited as prices are now trading just beneath a tough ceiling at the Falling Resistance Line.
No economic reports of interest are due today - but second quarter earnings season for the stock market kicks off, with earnings reports from Alcoa and Pepsi. Other major corporations reporting this week include Yum! Brands, Genentech, M&T Bank Corporation, Marriott International, and General Electric.
Analysts are predicting a 4.1% growth in earnings from the S&P 500 corporations in the second quarter, down from the first quarter’s 7.9% rate. So if earnings end up surprising to the upside, coming in above the projected 4.1%, stock prices could move higher, adding to their present lofty levels. And if this happens, it could pressure Bond pricing lower, as Stocks and Bonds compete for the same investment dollar. But if earnings disappoint, we could see a correction in the stock market, which could benefit bond prices. We will be keeping an eye on the earnings reports of the major corporations and monitoring how the financial markets react.
The Bond is now nestled up against the Falling Resistance Line, and in order for prices to improve further, the Bond will have to get rough and make a move to break above this tough ceiling. And even if the Bond does overtake this resistance level, the 25-day Moving Average lurks just a bit further overhead, which forced Bonds lower just last week. While an overall bias towards Locking remains prudent, we will carefully Float for now. Bonds are currently higher, so let's give pricing a chance to break through resistance.
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