Blogging from the Big D this week (Dallas, TX that is), actually I am about to get on a flight heading back to Miami to get at least a half day in the office today. The story of how I got to Dallas yesterday is rather fitting for this week’s post. Here is a brief look at what happened…
My original schedule was to fly to San Juan then over to Santo Domingo, DR, retracing my steps the next day. However, upon arrival in San Juan, I was then sent to Dallas followed by a flight home this morning. The point being that I was redirected “midstream” and without fully knowing what happened. Only after investigating further did I begin to see the bigger picture.
Mortgage backed securities last week reacted very similarly. Of the two main events, neither presented a clear picture of what lies ahead.
First, the Fed decided to leave rates unchanged despite warning of the increased inflationary expectations. Friday’s PCE and other data showed inflation to not be of much concern, or was it? Data was rather skewed as the economy was flooded with the stimulus checks, so the outlook may not be as rosy as it appeared, but only time can prove that.
Nevertheless, in the battle for the trader’s dollars, bonds won the week and sent mortgage rates lower. This could be either a winning or deadly combination. And there won’t be much delay for the data to be pouring in as you can see below, with the end of the week sparking its own fireworks with the Jobs Jamboree.
- Monday: Chicago PMI (9:45)
- Tuesday: ISM Index (10:00)
- Wednesday: ADP Employment Report (8:15), Crude Inventories (10:00)
- Thursday: Non-Farm Payrolls (8:30), Unemployment Rate (8:30), Initial Jobless Claims (8:30), Average Work Week (8:30), Hourly Earnings (8:30), ISM Services Index (8:30)
This week will be a pivotal one for bonds on both the fundamental and technical sides. Bonds have been pushing higher over the last two weeks and have broken through their 25-day moving average. They are up against this level and the downward trend line right now, so if they can hold their own this week, we can say that trend has been broken and rates will be heading lower once again. If not, well, get ready for the next freefall.
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{ 3 comments… read them below or add one }
True that the stimulus checks are propping up the data. In fact, there seem to be some people out there saying that one more stimulus is required. I’m thinking that’s a meme that’s going to be picked up by a lot more people.
Interesting and informative post, as always you provide us with quality information and key indicators to watch.
What is your feeling about the stimulus checks will it be enough to boost the economy out of its current down turn?
Also, what do you think about the $300 billion dollar legislation that appears to be poised to be passed to help troubled home owners (i.e. economic stimulus disguised as assistance)?
Ling – You may be right about it being picked up by more people.
Cliff – Thank you for the compliment. As for the stimulus checks, I think they will have little to do with the economy returning to growth. However, as we have seen in recent reports, the economy appears to be steadying itself.
Regarding the $300B legislation…I am very glad to see my hard earned tax dollars being used to bail out the mistakes of homeowners. Aren’t you?
Sure, there are some that probably deserve to be bailed out, but the overwhelming majority do not. If the government keeps encouraging more financial mistakes, we are going to end up with a country full of financial illiterates.