For the most part, both fixed income and equity markets are quiet following the wild Goldman Sachs induced ride we had on Friday. Bonds, notes, and mortgage backed securities seem to be at a crossroads, trying to handicap the ramifications of Goldman’s alleged fraud. That alone will keep a flight to quality bid in the market.
Greece is a helper on that front as well with more uncertainty, adding 35 bps to their yield (10 year debt) and then there’s China, tapping the brakes on real estate lending. That sent the Shanghai index down 5% in early trading. Stateside focus is clearly Goldman but also on 1st quarter earnings. Citi reported before the bell, actually making a profit of .14 cents a share. At any rate, it’s a good thing for the tax payers since we own a big chunk of the company.
Leading Economic Indicators were also released, up 1.4%. The print was .4% better than market expectations but in reality, the index is such a rear view mirror piece of data that most traders blink as it goes by. Speaking of data, it’s a light week with the next release due for Thursday and Friday. Existing Home Sales, New Home Sales, and Durable Goods Orders will be the headliners.
The tactical bias for Austin mortgage rates and pricing is to remain neutral, trading a range on the 10 year note between 3.75% and 3.82%. Stocks want clarity on the Goldman/SEC issue which will lead bonds to react accordingly. Our work on the 10 year note chart is providing neutral to bullish trend signals and overbought conditions at the same time. Classic example of a mixed bag.
Currently, the 10 year note is off 3/32’s (yield 3.78%), mortgage backs off 3/32’s, and stocks off 8 points on the big board.