by Ben Bauer
Mortgage Bonds continue to follow the path of least resistance lower. Prices are now dangling above important support at the $102.75 area. Tame inflation data couldn’t help to propel Bond prices higher. The November Core PCE rose by 0.1% versus the 0.2% expected, while year-over-year Core remained at a cool 1.3%. Personal Income & Spending were in line with estimates, while Durable orders were unchanged last month. Oil prices continue to rise for the 2nd straight day, which is helping to push Stock prices higher in early trading. WTI oil is up over $37/barrel after hitting an 11-year low of $34 on Monday. OPEC said today that it sees demand for its crude oil falling for the rest of the decade. We have seen poor economic reports delivered the past two days and Bonds have been unable to build any positive momentum. At the same time, Stocks have some room to run higher to revisit resistance at the 200-day Moving Average … so a little Santa Claus rally may take place. Finally, there is no Fed bond buying for the rest of the year. For these reasons, new clients should be advised to lock. Let’s watch and hope the Bond holds above the current support zone, for if prices break beneath $102.75 area, the next clear resistance lies another 100bp beneath current levels. Also, watch the yield on the 10-year Note … a break above 2.30% would suggest higher rates ahead.