Mortgage bond prices opened lower Wednesday morning erasing the small
gains seen yesterday afternoon. Rates are under pressure from positive
stock futures, an indication the Dow will open higher.
With no
news set for release this morning traders are waiting for stocks to
begin trade at 9:30 am ET. At the opening of the bond market at 8:30 am
ET Dow futures were up 97.
This afternoon promises to be
interesting. The Federal Open Market Committee concludes its two-day
meeting. Any changes will be announced at 12:30 p.m. ET, with Fed
Chairman Ben Bernanke scheduled to convene a news conference at 2:15
p.m. ET. Mr. Bernanke has three options; do nothing, extend Operation
Twist or announce another round of quantitative easing. Economic
conditions have deteriorated since the Fed last met. This puts pressure
on the Fed to do something. Stocks are betting on QE3. Be careful
this afternoon. If Mr. Bernanke were to drop a “tape bomb” during the
press conference the markets would become volatile quickly.
Central
banks around the globe are under pressure to act as economic activity
slows. The Bank of England Monetary Policy Committee is under pressure
to extend their current quantitative easing program. The bank of Japan
stands ready to act if the situation in Europe continues to decline.
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