Interest Rates Recover, but Will They Hold

This mornings we are up 8 ticks on the day in the mortgage backed securities market, a somewhat surprising jump considering we are moving into a long holiday weekend and we saw such a strong sell off yesterday. Not that I am complaining. I'm happy to see our market up, leading to lower interest rates; the question is will these gains hold throughout the day?


I am skeptical, but have not seen any information today that indicates these gains are not sustainable. At this point in time the fate of our market is in the hands of its counterparts, namely the stock market.

Yesterday's losses can be attributed to the gains seen in the equities market. The influx in capital into the short term markets essentially derived from the sell off in the long term markets. The winds of this give and take relationship however have changed this morning and we are seeing investors move into the long term markets. This suggests that the sell off yesterday has brought our market to a lower level investors interpret as a "bargain." If these gains hold, come next Tuesday we may return to recent highs and the low rates all are looking forward to. With that said, I would not count on things playing out this way. Pay close attention to Tuesday's trading. It will be a telling day.

All things considered I anticipate we will make back about half the losses we experienced yesterday.