U.S. bonds are having a tough end to a bad week. With chatter growing throughout the week about a December rate hike, the spectacular October jobs report has made a December rate hike feel like almost a done deal. The October payrolls grew by 271,000, well more than expectations of 185,000. The unemployment rate fell one-tenth to 5%, and the closely watched employment participation rate (U6) fell to 9.8%.

U.S. Treasuries are getting clobbered Friday morning with the 10-year treasury yielding 2.30%, and the 2-year treasury spiking to .91%, a level not seen since May 2010.

With adjustable rate mortgages (ARM) still very attractive and fixed rate mortgages still near 4%, we are strongly biased toward locking in interest rates.

U.S. bonds had a tough week with the 10-year U.S. treasury trading up to 2.18% after the Federal Open Market Committee (FOMC) comments on Wednesday.

Commentary from FOMC did not rule out a rate hike this December. In its policy statement, the FOMC reiterated its dual mandate of full employment and 2% percent inflation as a continued theme in the decision to raise short term interest rates. The comments suggested that continued modest increases in employment could tip the Fed to raise rates. No one knows for sure, but trading suggested a stronger bias toward a December 2015 rate hike after the FOMC comments were released.

While U.S. policy makers continue to discuss rate hikes the rest of the world continues to ponder how to use monetary tools to stimulate their economies. How this will play out is anyone’s guess.

With so many diverging policy making decisions being presented on a global scale, we are watching the market closely and are very cautiously floating interest rates at this time.

U.S. bonds sold off this week in response to another positive week in the world stock markets. The U.S. stock market experienced an excellent week of trading as global central banks (minus the United States) are all utilizing quantitative easing policy tools in response to their slowing economies and deflationary fears. Both China and Europe are lowering interest rates. China surprised the market Friday morning with an interest rate cut. This has pushed money out of the safe haven status of U.S. bonds into riskier assets such as equities and has increased bond yields.

While a Fed funds increase is off the table for October and maybe for the rest of the year, it will be interesting to see how U.S. bonds trade as other countries pump their economies with new “QE” while the U.S. moves away from these stimulus policies. As written previously, the world economic issues remain highly complex and deciding where rates will trend is a tough call.

However, with U.S. bonds still trading a tad over 2%, we are biased toward locking in interest rates at these levels.

This week was light on economic reports. While last week’s job report was a boon to bonds and provided a lot of commentary on whether the Fed would raise short term interest rates, this week’s release of the Fed’s minutes, which were dovish in nature, sent stocks on a bit of a run at the expense of bonds. The Fed minutes verified policy makers concerns about a global economic slow-down, as well as their indecision about raising short term interest rates. Where we go from here is anyone’s guess, but a 2015 rise in short-term interest rates seems to be off the table for now.

Mortgage rates feel a bit stuck at the moment, but each week can bring new surprises. However, with mortgage bonds near various support levels, we are biased toward locking in rates.

With the spotlight this week still focused on the Federal Reserve, and whether or not the Fed will increase short term rates this year, all eyes were on the September Jobs Report.

The report was a disappointment with just 142,000 new jobs created. This number was well below the predicted expected job creations number of 205,000. Furthermore, July and August jobs were revised lower by a total of 59,000. The unemployment rate remained at 5.1%. However, the Labor Force Participation Rate, which measures the number of people in the labor pool, dropped to 62.40%, the lowest number since the early 1970’s. A bright spot in the September report was the U-6 number, which includes anyone who desires a full-time job, but cannot find one, which fell to 10%, the lowest reading since 2008.

Globally, central banks around the world continue to prime the pump to boost their economies. Foreign government officials have put a great deal of pressure on the Federal Reserve not to increase interest rates. This last jobs report may have convinced the Federal Reserve to keep short term rates at zero until 2016.

The Fed is in a tough spot: should they raise rates and hurt the global recovery, or, don’t raise rates and threaten to create another domestic bubble in riskier assets.

With the poor jobs number, and the 10 year trading under 2.00%, we are closely monitoring the bond market and are biased toward floating, albeit carefully.

It is all about the Federal Reserve (The Fed). Janet Yellen, The Fed Chairwoman, clarified some policy thinking on Thursday and intimated that the domestic economy is good, that employment is trending in the right direction, and that short term interest rates could very likely go up by the end of 2015. This hurt U.S. bonds through rising yields and energized the U.S. stock market which traded positively on the news out of the Fed.

There were several moderately impactful economic reports this week, namely, 2nd quarter Gross Domestic Product and Consumer Sentiment. Both reports came in better than expected. These positive reports have added additional pressure on rising bond yields.

Technically, mortgage bonds were unable to break through certain resistance bands this week which suggest yields could continue to move higher. We are biased toward locking in loans.

U.S. government bonds continued to rally broadly, in what is being called a “relief rally” in response to the Federal Open Market Committee’s (FOMC) decision to not raise short-term interest rates, also known as the Fed Funds Rate, from 0 to .25%. The decision to not lift rates was met with both disdain and approval as a mixed bag of opinions have surrounded this most recent FOMC meeting.

The Fed cited the recent economic events, including China’s slowdown and the overall global market uncertainty as reasons to not lift near term rates. Expectations are growing that the Fed might may wait until 2016 before deciding to move rates, even with the data showing little inflation and an improving job market.

The biggest benefactor of the FOMC’s decision has been short-term interest rates, which are highly sensitive to changes in the Fed’s policy.

Due to the developments over the last two days, we are mildly biased towards floating rates based on the last FOMC policy meeting.

Please remember those who perished in the 9/11 attacks.

Some days are up; some days are down- so goes the global equity markets the last several weeks. One would think that U.S. bonds would be the beneficiary of this volatility and that bond yields would move much lower. However, even with the lowered consumer sentiment reporting this week, and weakening commodity prices, bond yields continue to stay range-bound with the 10 year treasury around 2.18%.

All eyes are on next week’s 2-day Federal Open Market Committee (FOMC) meeting. There are both arguments for and against a rate lift off from zero on short term interest rates. There is no clear sign of what both the FOMC will do with rates or how bonds will respond.

We continue to remain cautious and biased to locking in loans based on so many perceived unknowns.

Another week, another volatile session for both foreign and U.S. equities.

Friday morning saw the Dow Jones Industrial Average down over 300 points on a decent employment report. With Asia’s stock market tumbling, Europe suggesting further stimulus, and the U.S. concerned about increasing interest rates, and a slowing global economy, the question remains as to whether the Federal Reserve will lift short interest rates from zero in September.

Both the U.S. bond and equity markets remain highly volatile. Bonds have only benefited marginally from all of this volatility with the U.S. 10-Year Treasury trading around 2.13%.

With the bond market unable to post any meaningful gains (yields move inverse to price) in the face of extreme global stock market losses, our inclination is to recommend locking in rates at these price levels.

The U.S., European, and Asian equity markets experienced tremendous volatility this past week with the Dow Jones Industrial Average losing more than 1,000 points Monday morning. However, the global markets did rebound during the middle of the week to take back most of the losses suffered Monday.

On Thursday, the Commerce Department reported that GDP expanded at a 3.7% seasonally adjusted annual rate in the Spring. This positive GDP number, along with China priming the monetary pump with its own Quantitative Easing (QE) stimulus program, led the equity markets higher.

Even with the massive volatility surrounding equities and the tame inflation numbers, U.S. bonds did not benefit, with significantly lower yields. With the 10 year U.S.Treasury hovering around 2.18%, we remain slightly biased toward locking as bonds trade between resistance and support levels.