Stocks are much lower and Mortgage Bonds are higher so far this morning. News that China has tightened credit is having a “butterfly effect” and negatively affecting Stock markets around the world. In addition, Fed Vice Chair Fischer said that we have gotten to use to 0 rates and when they do up, they will go up for some time. These remarks did not affect the Bond Market, but Stocks are selling off.
And speaking of the Fed, it is being heavily debated on when the Fed should remove their “considerable time” language from their statement. Many are speculating it may be removed at the Fed Meeting next Wednesday… We will find out next week. It’s another quiet news day, but we did get the National Federation of Independent Business (NFIB) reported that optimism among small business owners increased 2 points in December from 96.1 to 98. This was much higher than expectations and the best in almost 8 years. Of the 10 components surveyed, four improved, three remained stable, and three declined. But the component “Expect the economy to improve” was up a whopping 16 points and “Expectations for real sales volumes” was up 5 points.
Mortgage Bonds have moved higher after testing support bouncing off of support on both Friday and Monday, and are now trading just above overhead resistance at 104.29. The 10-year Treasury Note Yield has most lower after testing its 25-day Moving Average and is now back down below support at 2.22%. Our patience certainly has paid off.