Although we saw volatility in bonds and mortgages last week, Bond prices finished the week in a rally based on a flight to quality. Due to uneasiness in the hedge fund markets, primarily those linked to sub-prime mortgages, investment dollars were shifted to government bonds – causing the rally in 10 yr. bond prices and sending 10 yr. yields lower.
After a brief dip this morning, there has been continued follow through as bond prices continue to rally based on Existing Home Sales numbers coming in as projected. Economic news this week is more plentiful after a slow week last week. We also have an FOMC meeting on Wednesday with an announcement on Thursday, which will have the interest of the markets as the players will be anxiously awaiting the Feds post meeting comments. Analysts will be looking for direction from the Feds about their expectations on inflation.