China Data Hurting Stocks, Helping Mortgage Bonds
The big news this morning is the plunge in Gold prices, now at $1,406/oz. down $96 after declining quite a bit last week. The drop is due to bearish technical factors ushering in additional sellers along with fears that the recent sale of Gold from Cyprus could touch off other European nations to sell to cover their debt woes. We still think Gold, as a long term holding, is sound…the EuroDrama is not going away and the global monetary printing presses will be around a lot longer than most think. The only good news from the drop in commodities is seeing Oil slip beneath $90/barrel, giving some well needed relief at the pump.
The only economic data point today was the weaker than expected Empire Manufacturing Index falling to 3.1 in April from 9.2 last month and below the 5.0 expected, which had no impact on trading. The rest of the week features readings on housing, consumer inflation, weekly claims and manufacturing data from the Philadelphia region. There are no Treasury Note or Bond sales this week.
Technically, the benchmark 3% coupon is once again nearing resistance at 2013 highs. A look at the Bond chart shows a big fall the last couple of times we were here. We are going to maintain our cautiously floating stance short-term and floating longer-term to see if the positive momentum can propel prices above this nearby resistance – for if it does, we will see rates move another leg lower.
And remember its Tax Day!