No news but a lot of action as the new week begins. Gold has made a new high, trading above $1100.00, commodities on the rise, and the dollar down against almost every major currency in the world. Oil has rebounded, trading at $79.50 (up over $2.00), as the approach of Hurricane Ida has traders on edge. Stocks got a lift from Europe and Asia with the Dow currently up 130 points. Bonds, notes, and MBS continue to hold up well despite 101 billion in supply coming this week.
The 3 year note auction (today) seems to be in the bag while the 10 year note and 30 year bond will be more of a challenge. Reason being is this if the first refunding auction without Fed buying support. On the positive side, low inflation, high unemployment, and the Fed’s continued support for low mortgage rates into 2010 will keep the downside (higher mortgage rates) limited. Other factors giving bonds a boost is the pricing of Cisco’s 5 year corporate deal which was rate locked on Friday and now being pricing, allowing the hedging to be unwound (buying treasuries). Also, given that this is November, many dealers close their books this month and begin to plan the year end trade.
We’re starting the week near the center of the range with slightly positive readings on daily patterns and oscillators. Although it’s hard to see a stealth rally developing, all signs point to limited downside movement. The week ahead is light on the news front with second tier data out tomorrow, Thursday, and Friday. Wednesday’s bond trade will be closed but stocks will be open.