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Tuesday, September 30, 2014

Mortgage Bond Market Analysis

Happy Tuesday - the benchmark bond started the day down more than it was up yesterday but that trend reversed when the three pieces of data that were released all came in worse than expected:  1) Case-Schiller Home Price Index came in at 6.7 vs. expectations of 7.5 and previous of 8.1, 2) Chicago Purchasing Manager's Index came in at 60.5 vs. expectations of 61.9 and previous of 64.3, and 3) Consumer Confidence came in at 86 vs. expectations of 92.5 and previous of 92.4.  None of these will move the benchmark bond a whole lot but they did help to get it off the lows.  As I write this it is currently down 7 basis points for the day.  Here is the chart (the bond moved down a bit after I took this picture):

My thoughts on where we are headed from here:  The benchmark bond is testing some fairly strong resistance levels after a nice run-up over the last several days.  Additionally, the market is overbought so there is a good chance we could see some sell-off.  Barring some really dour reports on jobless claims on Thursday and the employment report on Friday, look for the benchmark bond to sell off and rates to move hire.  I recommend locking before the close of business on Wednesday - you could get a pleasant surprise on Thursday or Friday but I wouldn't count on it.

Personal note:  I will be out of town on Thursday and Friday with no access to the internet so there will be no report on the jobless claims or employment data until next week.

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