Market Moving Sideways

Mortgage Bonds are trading slightly lower, but off the worst levels of the session.

The big news so far today comes from down under, where the Reserve Bank of Australia unexpctedly hiked the country's benchmark interest rate by .25%, from 3.0% to 3.25%, saying they felt it was safe to start cutting back on economic stimulus. Further...they also commentd that more hikes are likely to be coming. Stocks are higher around the globe, as Traders see this as a signal that the global economy is on better footing. And as a result of Stocks moving higher, Mortgage Bonds have been pressured lower.

The hike from Australia has also pressured the US Dollar lower, based on the perception that other nations may be poised to more rapidy raise interest rates, making heir currency more attractive against the Dollar. The weak Dollar, has pushed oil and other commodities such as precious metals higher as well. In fact, Gold hit a record high earlier this morning, reaching $1040.00/ounce!

Australia looks to be in a better position to hike rates than the US does, and one big reason is the current unemployment rate in Australia, which now stands at 5.8%. This is elevated from their last year's very lean 4.2%, but still under their 30-year average of 7.2% for the country. With our own unempoyment rate near 10% and rising...we just don't see how the Fed will be able to hike rates in the very near future.

Stocks will give us a better picture as to how well corporate America and the economy is doing, when 3rd Quarter earnings start to be released tomorrow. If earnings and/or future guidance disappoint, Stocks could lose ground in a hurry...and this could help Mortgage Bonds.

I'm looking for Congress to extend the First Time Home Buyer Tax Credit past the November 30th deadline. If this happens, home sales should remain steady through the first quarter of 2010. One way to get this economy rolling would be to eliminate the Capitol Gains Tax for two years. That would spur investors to invest and create jobs. I don't think the present administration will do anything such as that...it makes too much sense!