An Exception To Every Rule…

  • December 9, 2013

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An exception to every rule…

Whenever I write about the bond market, I tend to be a little matter of fact: “bad news means good news for the bond market.”  Bob Walters tells me every time, “careful with that strong wording! There is never a clear cut cause and effect in financial markets.” I know this; there is an exception to every rule. I knew one day I would be proven wrong.  Well, on Friday was that day.

  • The market rallied after the Employment Report came in stronger than expected. Wait, what? Typically, good economic news means bond prices decrease, increasing mortgage rates. Friday, investors had prepared themselves for a strong payroll number; actually they over compensated. Good news meant rates improved. I was wrong. I can admit it.
  • This week is light on economic news; the only piece of relevant data is Retail Sales, which is released Thursday. This could mean there will be little volatility in the market this week…or maybe not.  See; I’m learning.
  • James Bullard, a top Federal Reserve banker, stated today the Fed could announce a bond buying reduction as soon as the next meeting. This means the government will buy less mortgage backed securities, which may increase the interest rate you have to pay on your mortgage. See what I did there? A change in policy could move the market. He has said this before and the Fed has taken no action. Will they do it this time? Your guess is as good as mine.

I know one thing for sure, tomorrow no economic new is scheduled to be released. Thursday with Retail Sales, Jobless Claims, and Business inventories are all released before 10 AM. We will close the week with a Producer Price Index report on Friday.

-By Lindsey Fediuk, Quicken Loans Capital Markets Analyst

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