Rate Watch 9/25/08: Carefully Floating

Just as the past two days of advice has started, this morning I am recommending carefully floating as Stocks are up 190 points and Bonds are up 10 bps from open. Today's news which benefitted Bonds included a worse in 7 years Initial Jobless Claims Report reading which indicates weakness in the Labor Market. The Durable Goods Report also came in lower than expectations, showing again that we have inherent liquidity problems in our economy because it takes financing to build durable goods and expand inventories. These two reports are adding to the need to pass the $700B rescue plan, and quickly! Several key reports coming out of Capitol Hill from President Bush's National address last night, is that we will see action on the recue plan by Monday 9/29/08! For now, I recommend floating, but as we have seen recently, the direction can change quickly and I will advise you of a need to lock if the Bonds change direction with the additional testimony of Paulson and Bernanke today. On the technical side, Bonds are trading just above their floor of support at 100.06 (floor at 100). As previously mentioned, we have seen Bonds bounce off of this floor in the past, but in the event Bond Prices fall below this floor, we could see another .49 bps drop in prices (drop in price=increase in bond yield=increase in mortgage rates).