Bulls Cast Their Vote With the 10-Year Note
The 10-year Note recovered today from a pullback over the last couple of sessions. On Monday of last week, the Fed hinted that a rate cut might be coming at its December meeting, sending stock prices higher. However, Bonds didn’t follow suit, perhaps because there was so much money going into the stock market that had to come from somewhere – namely Bonds. A second potential reason is that the 10-year market was on such a hot streak that it needed a pullback and last week was it.
On the chart, we see that prices have been above both the 15- and 25-day moving averages for almost a month, and haven't touched the 25-day line since mid-October. This market has been on fire lately for the bulls – from a technical standpoint, sustainability is the main question at the moment.
But other questions need to be asked:
The Fed certainly plays a big part in this, but how much of this rumor has already been priced into this market?
If the Fed does indeed make a move, how much more will it move rates either up, down or sideways?
Will the continued subprime problems attract investors to a "safe haven?"
How much longer will real estate investors wait to come into the market, considering the housing slump has been the main driver of the rate cuts in the first place?
Mike Tosaw, Director of Education
