Mortgage Bonds are soaring higher this morning, thanks to the Fed reiterating its New Year's Resolution to purchase $500 Billion of Mortgage Backed Securities by June 2009. The announcement has led to another wild disconnect between Mortgage Bonds and Treasuries, as the 10-Year Note is trading sharply lower, while Mortgage Bonds are sharply higher.
In other news, Initial Jobless Claims were reported at 492,000, which was well below expectations that it would rise to 575,000. The Labor Department said that seasonal volatility led to the surprise drop in unemployment claims.
With the Fed's new program starting early next month, we should see improved Bond prices ahead - but we're also likely to see more volatility as the New Year begins. For now, I'll maintain a floating stance, but be ready to take action if the situation changes.
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