Rate Update December 18, 2008

Interest rates come back to earth after yesterday morning’s short lived free fall. 

It only lasted about 90 minutes…then bonds started to quickly erode and investors were quick to have multiple re-prices for the worse yesterday.  There wasn’t any particular news that was released to cause mortgage backed bonds to start trading lower, it was simply traders feeling that the bond prices were so high that selling started to occur to capture some profits off the table.

Today, bonds have not had much reaction to the struggling Jobless Claims numbers that have been reporting.  The four week average of Claims has rose from 2,750 to 543,750-the highest level since 1982.  This would typically be good news for bonds and interest rates but so far have been trading sideways this morning.

Current Outlook: cautiously floating to see if bonds can regain some ground from yesterday