There are no economic reports to be released today that will have an impact on mortgage rates.  In addition, the market will be closing at an earlier than normal 2pm.

When no economic reports are set to release, traders watch stocks for a sense of the market direction.  Stocks are up currently led by Merrill Lynch who is receiving a large cash injection from, you guessed it, foreign investment.  This time it is from Singapore.  In addition, Merrill announced they will sell their commercial finance business to GE.

Bonds have not reacted much to the news with MBS's currently about 4/32nd's higher than Friday's close.  Bonds certainly took a beating on Friday and are not getting any firm floor to stand on today either.  With the holiday tomorrow and hardly any economic reports set to release later in the week, rates could go either way.  The stock market and corporate financial news will have a bigger impact than normal due to the light economic news calendar combined with the normal volatility caused by decreased trading volume during the holiday season.

Floating is a risk tempered by the huge losses on Friday.  In other words, bond prices have risen so dramatically in the last several trading sessions that technical forces suggest they may decrease slightly (moving rates lower) regardless of a continued move downward.  If you are going to float, which is a moderate risk through Wednesday, keep a sharp eye on stocks and financial headlines.  Anything that sends stocks higher will likely push mortgage rights higher as well.  As always, the conservative play is to lock short term.  Stay tuned for an analysis of Wednesdays market activities and the economic reports of the rest of the week.  This will hopefully give a more solid idea of the short term market sentiment.

Long term, experts are divided, with about 40% predicting recession.  If recession occurs at the same time as rising inflation (stagflation), normally bond friendly news will have less than normal impact on rates.  As for now, the mood is "wait and see."