Rates worsened somewhat today at the open as mortgage bonds continue to lose ground in overall bond market softness. The benchmark 10-year yield was up as high as 3.391% (Really UGLY) but has since fallen back down around 3.30% as Treasuries get a bid (from the Fed with HOT money printed out of thin air) and turn positive. Wasn’t the idea behind the QE2 scheme to bring rates down? I guess “Mr. Market” isn’t convinced that the long term effects of QE are as benign as Ben B. and the Fed would have us all believe. In the absence of the Feds distorted demand, the market will revert to its longer term worries over the corrosive effect of QE monetary policy promulgated by our central bank and then, as if almost by magic, when the Fed swoops in to purchase debt, the market will promptly forget its well founded long term fears and rates will come off a bit. Watch this dynamic today as the Fed moves in to purchase… MBS have begun to pare earlier losses but lenders will be slow to re-price for the better as volatility has eroded confidence that the price will stick. Stock markets are positive today given China didn’t raise rates as expected to cool off imported inflation from the Federal Reserve resulting from the boat loads of fiat money it is creating. No economic data is scheduled for release today but tomorrow brings quite a data dump that will impact markets with the Fed rate decision (no change), retail sales, producer price index and business inventories. This week is the last full trading week of 2010. Expect volatility to remain high, as thin trading volumes will only amplify market movements.
In the news today…
- Stocks, Dollar Advance as China Refrains From Rate Increase (they raised reserve ratios instead)
- European Leaders to Debate Permanent Crisis Mechanism (= less sovereignty & more centralized power for the EU)
- China Said to Extend Increase in Reserve Ratio for Some Banks (inflation fighting response less raising rates)
- ‘Shadow Lenders’ Emergency Fed Loans Benefited Biggest Banks & FOREIGN BANKS (what a shocker…our Fed is now the central bank of the world…and you are on the hook for it)
Reading Suggestion for Today… Capitalism: The Unknown Ideal, Ayn Rand
“One of the most revolutionary and powerful works on capitalism--and on politics--that has ever been published.” --Professor Leonard Peikoff, Barron's magazine.
“One of the most revolutionary and powerful works on capitalism--and on politics--that has ever been published.” --Professor Leonard Peikoff, Barron's magazine.
Your Takeaway…
- Lock in your profit as quickly as possible and DON’T PLAY THE MARKET. We all need to become experts in all maters economic with specific emphasis on the bond market. Your clients rely on your expertise and you being well read and very well informed as a valued and trusted advisor to them. Dig in and continue to develop yourselves with an aggressive self-imposed reading and studying regime.
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