About 12:00 today selling took MBS prices down by 18 bps from levels at 9:30, but a couple of Fed officials were out re-affirming the Fed would keep the Fed Funds rate at the zero to 0.25% range until at least next year. Chicago Fed President and Richmond Fed President both echoed the same thing.
Beside the ADP report in the morning the Jan ISM services sector index will be out at 10:00, the estimate is an index at 53.9 frm 53.0. So far the ISM manufacturing, the manufacturing and service sector indexes in China and Europe have not met expectation.
PIMCO’s Bill Gross was out today; he said the pace of Chinese economic growth is among the biggest questions in developing nations and greatest risks for financial markets. He referred to it as the mystery meat of emerging-market countries. “Nobody knows what’s there and there’s a little bit of bologna, so we’re just going to have to wonder going forward through this year as to the potential problems in China and other emerging markets.”
The CBO was out today with its forecast for this year’s Federal deficit; according to the CBO the deficit will shrink to its lowest level in seven years to $514B, about 3.0% of GDP. The highest deficit was n 2009 at 9.8% of GDP. Almost forgotten with the recent financial markets roiling; the federal debt limit is scheduled to expire on Friday.
I do not expect much change in the stock and interest rate markets now ahead of the Jan employment report on Friday. Stocks remain technically oversold and the rate markets overbought. Markets fully appreciate the employment report generally offers huge surprises.
I am suggesting to float your rate until Thursday.
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