Rates Break Through Range... New Year Highs... bringing Rates LOWER

This is unprecedented. I don't know any other way of explaining our market. This is clearly a flight to safety. Fear of international markets, questions about our own economic recovery, our national debt skyrocketing; investors are beginning to see equity markets as overvalued. Consequently, the long term markets are the primary beneficiary.
As the mortgage backed securities market climbs leading us to lower interest rates, its benchmark competitor, the ten year treasury's yield is steadily falling. It is important to understand that these are typically inversely related. That is, when the treasury yield climbs, the mortgage back securities falls, when the treasury yield falls, the mortgage backed securities rises.

Let's take a look at our market...

A one month graph of the mortgage backed securities market... the red dashes highlight our old range, the blue dashes highlight our new range... as you can clearly see we have broken out of our new range leading once again to the best rates of the year. Is this sustainable?


Here is a look at our last five days of trading... let's take a close look at the arrows... the green arrows clearly demonstrate the bulls are gaining momentum on the bears... the green arrows consistently grow in size and get steeper, while the red arrows representing the bears continue to get smaller and flatter... Until the international markets stabilize, I think these gains may actually hold.

Tomorrow will be an interesting day, options expire next tomorrow suggesting a slow and conservative trading day in equities market which is good news for us, however Friday's usually a profit taking day as investors shore up funds moving into the weekend. All things considered, I expect tomorrows trading to be much calmer than that we have recently been experiencing.