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.