Will US help Europe?

Mortgage Bonds hit intraday record highs yesterday, but closed off those best levels after the Wall Street Journal reported that the Fed may act with additional stimulus as early as the upcoming Fed meeting on July 31 - August 1. Stocks moved on higher on this news, at the expense of Bonds. The slide in Mortgage Bonds is continuing this morning after ECB member Ewald Nowotny said that there are arguments in favor of giving Europe's rescue fund a banking license as leaders ponder a full scale bailout of Spain. In addition, positive earnings reports are also helping to drive Stock prices higher today. I will continue to recommend a Locking bias in the short-term to avoid volatile price swings like yesterday and this morning. However, longer-term you can still float as the trend is still our friend and fundamentally Bonds should continue to be supported from high uncertainty abroad.

Leonard Winslow
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