Have you been keeping up with all of the re-prices today?  Today is a great example of a day when if you are not watching the markets closely, you could lose your client’s shirts (and likely your own).

Well, I actually expected mortgage bonds to hold up fairly well today and come crashing down tomorrow, but oh well.  As I have been saying for a long time, inflation would get the better of bonds eventually and inflationary fears have not overtaken recessionary fears and bonds are suffering dramatically as a result.

Last week, I mention Cupid shot mortgage bonds through the heart and they began to bleed to death, getting only a band-aid to cover their gaping wound.  Today, that gaping wound was torn open further and bonds are now dropping with the aerodynamics of a greased brick, down 129 basis points on the day.  That equates to mortgage rates increasing by about .25% in one day, maybe even more.

Remember that the CPI data and FOMC Minutes are due out tomorrow, so the bloodshed may be far from over.  There is a glimmer of hope in the fact bonds are now well into oversold territory, but that hardly protects them against the economic onslaught. 

The other point to be made here is that of watching the correct security.  The 10-year note, which many LOs still believe to be a good guide is sometimes far from it.  In fact, today, even though they are both down, the 10-year is only down 106 basis points in comparison.  Those following it may not realize the impending multiple re-prices that occurred as the day moved on.

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