New Year for Mortgage Bonds

Happy New Year! Today is the first trading day of 2009 and Mortgage Bonds opened just a little bit higher this morning. Look out though, that could change.

Just a few minutes ago the ISM index was reported showing the fifth consecutive monthly decline. This index is a key manufacturing gauge.

Today, the SEC Chairman Chris Cox is expected to get back to Congress with ideas, if any, on how to address Mark to Market accounting. If Cox presents a plan that modifies the valuation in such a way that large discounts and write downs are minimized then the financial sector will be able to breathe. Think about it - the stock market would likely rally with financial stocks taking the lead.

Keep in mind, if that happens...bonds will pay the price. But it would be a price worth paying. Helping the financial instructions strengthen their balance sheets will open the door to lending again as well as help stabilize the real estate market.

A story to watch in early 2009 will be the Fed and their purchasing of Mortgage Backed Securities. They have promised to purchase large quantities and so far have barely tip toed in. When they start buying with more gusto, bonds should improve.

With the worst year for the U.S. market since 1937 behind us, may 2009 be a year of possibilities and prosperity for all.