Treasury Yields Open Lowered Today

Treasury yields crumbling, crude oil crumbling, the stock market crumbling---Merry Christmas. The 10yr at 10:30 AM is at 2.10%.  The stock indexes are down over 180 points and crude oil is also trading lower by over a $1.00 to $58.96.  What is also moving lower are mortgage rates but much slower than the decline in treasuries.

 The October PPI declined a little bit further than what was expected , but not much attention to it with oil the headline and its effect on equity markets and the global economic outlook.

On October 13th the 10yr closed at 2.09%, the lowest since June 2013 - and right now we are just short of that mark.  Crude is the headline driver, markets questioning whether it’s simply over supply or declining demand. It is a combination of both, global economies are weakening, the US doing OK but even our growth is questionable. We don’t believe the employment sector is as strong as the headlines that get all the attention, most jobs low paying. No inflation, no ability to increase prices and no momentum of substance for higher wages. Investors, here and globally, have one place to invest; the US equity markets. Although stocks are soft these days, we doubt it will last long and when indexes turn higher bulls will continue to believe the recent selling is nothing more than an overdue correction. Every instance of selling in equities this year have been buying opportunities in retrospect.

Look for two way trading today - the stock market may have seen its lows on the opening this morning. The bond market also at very tedious levels will be touchy with traders. It makes me a little uneasy when the stock market opens down 100 points and continues.  It is more comfortable when the selling occurs later in the day (in terms of interest rate movements). That said, every indicator we use is bullish for the bond and MBS markets - the fly in the soup though is our models and other momentum oscillators will stay bullish until the 10yr note rate increases to 2.25%, 15 bps above present levels. The point is we are subject to increasing volatility that would likely not turn the wider perspective bearish.

Right now, I am suggesting to lock in on these rates if you are closing in the next few weeks, as the future is murky and can change fast.  Remember when I talked about the roller coaster last fall into winter?  We might be heading towards that ride again.