Phil Grossfield's Blog


She Loves Herself; Glass Elevator Anaolgy

20140116-121954.jpgShe Loves Herself. This morning at breakfast my almost-6-year-old son asked my almost-9-year-old daughter if she loved him. She replied, “well, I love myself the most, but I love you too.” If this isn’t the reason we love our kids I don’t know what is. First, she loves herself…as a Dad how awesome is it to hear that?! Life is good, eh? I know they’ll be fighting about some stupid toy or that one glared at the other, but I’ll bask in the love-shine for now…

My Market Watch: Bonds Up +30bps. Prices Improved. This morning the 30-year Fannie Mae bond is up +30bps. Do you feel like we’re on a roller coaster? I said yesterday I felt the bleeding was going to be over and sure enough it stopped and now we’re headed back towards happier land.

The bond is trading just above a ceiling of resistance but the momentum is not convincing enough to suggest a huge rally. We might see a price improvement today if the bond can settle in above that ceiling…if it does the ceiling of resistance transforms into a floor of support and creates a baseline for traders.

20140116-121531.jpgThink of the bond price as a glass elevator that goes up and down. As the elevator reaches the next ceiling up there is a good chance it might stop and then head back down. This is how traders think about it…they might decide its a good time to sell since the elevator is as high as its going to get. But if the elevator goes through the ceiling and continues going up, then there is a good expectation it will keep going up until it reaches the next ceiling. I hope that analogy makes sense. So the question is how do traders decide if the elevator is going to stop at a particular floor? The answer depends on what else is going on out there…economic reports, geopolitical news, general politics, extreme weather, foreign policy, etc.

In general things are up and down and up again…typical I guess. Rates for the most part have settled in to their current range. This is where we’re going to be for a while.

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