10Yr Treasury back at 1.60% - Rates Steady

After markets were roiled yesterday over Deutsche Bank on news some hedge funds were taking their cash back, the idea of the bank failing finally broke through into the sun light today. Yesterday stocks were hit but the bond and mortgage markets did not react as nervous as equity markets. The reason, the equity markets are teetering on high values and the economic reports through August were soft.

Next week is employment week and the two key Sept ISM indexes (manufacturing and services).  The August declines in both led the view that the economic outlook may not be as rosy than thought. It was a one-month event and next week we will know whether it was an outlier or the beginning of a trend of slowing. The other worry points, retail sales, August sales were down and July was up. Employment looks strong, on Friday the September jobs data.  

The Fed may finally be going totally insane. Janet Yellen ventured the Fed may use the capital it has to invest in the US stock market. No matter the way it is presented, essentially the Fed has run out of tools to prop up a weak economy, the idea of our or any central bank stepping into equity markets is the last straw. Congress, time to stop it before it gets any traction. The idea is madness and confirms how worried the Fed is behind all of the rhetoric from Yellen and her minions. She apparently gets her ideas from the other central banks talking about it. Tampering with normal fundaments has been the mantra for central banks since 2008 and now has increased to insanity to even discuss it. Just the thought of it scares the hell out of me.  

The 10yr ended the session and week at its support at 1.60%.  Since mid-July the 10yr has flat, trading within a 10BPS range (1.50% and 1.60%). Not much of change compared the daily concerns that dominate trading. Mortgage rates in that time hardly moved but much has been made with the data.

In summary, MBS prices have remained at the recent highs, which are not far off from all-time highs.  I would strongly consider taking the risk off the table and locking in at these levels, even though I am tempted to float and see how the Deutsche Bank drama plays out.  Today closes the month and the quarter, and we now look to December for a possible Fed rate hike.  We may not be at the lowest rates ever, but we sure are close.  Trying to catch a falling knife is never easy, and can be extremely painful if mistimed. Float with caution, or lock and relax.  Happy Friday!