After several weeks of tremendous gains in the stock market, stocks are under some selling pressure as a result of bank analyst, Mike Mayo, spewing out a negative forecast which includes his thoughts that loan losses by financial institutions will exceed the levels seen from times of the Great Depression. The pressure in Stocks has given Mortgage Bonds a modest boost and prices remain just above support at the 25-day Moving Average.
However, with the recent changes to mark-to-market, I feel that there will be a positive impact on economics and the overall operations of the financial institutions because it will free up their capital ratios and allow them to do more lending, ultimately leading to higher profit potential.
There are few economic reports set for release this week, as the market will close early Thursday and also be closed all day on Friday for the Holy Week Holiday. There will however be additional Bond supply hitting the markets later this week, which could have an impact on the markets at that time.
Right now, since Mortgage Bonds are trying to cling to the 25-day Moving Average, I recommend carefully floating. Certainly, if a change of course is required, I will be in touch. In the meantime, I hope you have a great rest of your Monday and that your week is off to a FABULOUS start. If there is ever anything that I can do for you, please let me know.
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