In A Word:

That's right!  I saw the DJIA tick to 11999.  With the LEI report coming in marginally positive and Jobless Claims marginally negative, and the Philly Fed a mixed bag, stocks are having a hard time getting off the ground and MBS WERE neutral to improved a tick or two, until a sharp miniature sell-off.  It would be a bad day to be looking at treasuries as the 5 and 10 year are both down 2 times more than MBS and in fact were 6 ticks negative while MBS was 2 ticks positive this morning right about the time rates were released.  (hmmm....  It seems like this phenomenon was discussed recently...)

The Why:

The numbers were bad enough to see stocks drop a bit and bonds positive.  Unfortunately, the headline figure on the Philly Fed Survey didn't tell the whole story.  The "prices paid" portion of the report indicated inflationary pressure.  This was not immediately apparent and it took some bond fund managers 20 minutes or so to make the call to sell.  At the moment, in heavy trading, stocks are down, and MBS is rebounding off lows, but not yet positive again.

To Lock or Float?

Recall that tomorrow is quadruple witching which we discussed briefly yesterday, historically a very volatile day.  When I was writing the original 1200 word gem that I just deleted after the inflation concern surfaced, I was pretty excited about tomorrow.  This is not necessarily because I thought it would be a positive day, but definitely because it should be an exciting day.  From a technical analysis perspective, there are numerous market segments, MBS included, that are all at or near support levels.  This basically means we have a bunch of interconnected rubber bands, all pulled tight.  If one snaps, it's hard to keep the others from snapping or springing back.  Whatever the case, they won't stay stationary.  With no data on tap tomorrow, plus the quadruple witching, plus the DJIA hitting 12k with some analysts calling for lower, plus MBS being at the bottom of their trading range this year, plus MBS appearing to be able to rebound a bit, the environment seemed ready for a good potential buying spree.

Then that evil monkey, in the form of inflation, threw his evil monkey wrench in our beautiful catapult poised to launch us into the promised land.  With this morning's surprise course-change, almost all of my decision to lock or float would be based on observing the momentum from the rest of the day.  If we hold current levels or better, floating may be a big risk, but it could pay off even bigger.  If we drop today and stocks rally, floating will likely be too big of a risk to take.  It's all about the "momentum" of the rest of the day because the day tomorrow offers little resistance to market whims.

The Numbers:

 - Jobless Claims dropped 5k to 381k, slightly worse than expected 375k

- Philly Fed Survey down to -17.1!  Really abhorrent considering -10.0 consensus, but inflation component hurt us

- Leading Indicators slightly better than the expected neutral reading at +0.1.


It's too bad I already used the caption: "Get me off this crazy thing!" because George Jetson would be right at home in the MBS market today and tomorrow.  How much of a gambler are you?  I was feeling a bit more bold until the inflation data today.  But again, observe today's momentum if you are considering floating today.  Oh yeah, I almost forgot to mention, that if you haven't locked yet, you'll want to refresh this blog on a regular schedule (email alerts will arrive some day!), and pay no mind to treasuries at the moment.  If treasuries see massive losses, and stocks, massive gains, you might take notice, but check back here before locking.  If the momentum moves in MBS favor by the end of the day, you might be well rewarded if you put some of your chips on the "float" line.