Market commentary

Treasuries had a strong day yesterday and the 10-year is opening this morning at 2.45%, while the 2-year hit a new low and we are now sitting at 0.41%. Fed chairman Bernanke delivered comments yesterday that re-affirmed the market’s growing belief that he is leaning towards more quantitative easing. Answering a question about the effectiveness of additional QE at his speech yesterday in Rhode Island, Bernanke said “I do think that the additional purchases – although we don’t have precise numbers for how big the effects are – I do think they have the ability to ease financial conditions.” He also stated that it is “crucially important to put fiscal policy on a sustainable path” and that includes cutting our budget deficit. However, it would be more feasible to cut the deficit over the long-term than in the near-term. Translation: let’s stimulate the economy now and put in place some policies that will reduce the budget later.

Positive economic news came from the Institute for Supply Management as they reported their index of non- manufacturing businesses, which covers about 90 percent of the economy, rose to 53.2 from 51.5 in August.

The effect on the markets is a reversal for stocks as the DOW is currently higher by 120 points, while the bond market is flat from Monday’s close. Mortgage prices are slightly better, offering another good day to lock.