Well, I must admit I had some hope (still do a bit) that mortgage bonds would sail into nicer waters, but that all came to an end today as Dallas Fed Fisher, aka “Loose Lips”, sent the markets sinking into the depths with inflationary torpedoes.
In this market, as I have mentioned before, volatility is running rampant as the fear factor goes back and forth between recessionary fears and inflationary fears. Since bonds like recessions and hate inflation, you can see which is winning the daily battles in the charts. Today was another win for inflation.
In my Mortgage Market Update Monday morning, I was apparently overly optimistic and got my butt smacked hard. While I am still reeling from the pain, I still look at the potential found in the charts, the potential that bonds could rally yet again, maybe by Friday.
False hope? Maybe, but the “W” is a favorable pattern in charting, and if bonds can retest their 200-day MA and rally from it, a triple bottom would be very nice indeed. Of course, only time can tell, but we (at least I) can hope, right?
As you may have guessed, and if you have been following my daily mortgage market commentary at Florida Mortgage Daily, you know I am currently in a locking stance for my clients and have been since yesterday afternoon. Nevertheless, I am waiting semi-anxiously for the Jobs Jamboree and the market reaction.
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1 response so far ↓
1 Florida Mortgage Broker // Mar 6, 2008 at 6:06 am
Once bit, twice shy!
We used to manage our pipelines, watching the 10 year note and mortgage markets. Today there is no mortgage market, not as we have known it anyway. The majority of global economies purchased mortgage backed securities that carried AAA ratings. Today we know that these ratings were crap, the con job is complete and the damage is done. My father used to use the expression, @!%# on me once shame on you, @!%# on me twice shame on me. Anyone who invested in mortgage backed securities got burned, now those same traditional long term investors want nothing to do with anything labeled mortgage. I don’t blame them, do you?
Mortgage rates won’t realize any meaningful improvements, not now anyway. The long end of the yield curve probably will not rally even when the Fed lowers rates. Everyone knows the rate cuts are coming, they are also aware of current inflation concerns. This is not a good thing for the long end of the real rate of return on the 10 year note, now about 1.60%.
The US mortgage market has not been thought of so poorly since the great depression. We made our beds, now we sleep in them.
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