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Thursday, October 16, 2014

Mortgage Bond Market Analysis - The What the Heck Just Happened edition

HOLY COW!!  It has been a crazy ride over the past couple of days.  Yesterday started up about 84 basis points and then shot up even further to up 154 for a high then down to where it was only up about 22 basis points and ending the day up 33.  All in all rates went down about .375% and then back up about .25% and the initial up and down swing happened in about an hour so actual rates were never published with what they could have been.  There were about 9 or 10 various rate alerts and trend reversals due to tame inflationary news on one hand coupled with other week economic data and unsettling statements from Putin served as the catalyst for the big move up in bond prices.  By the end of the day the stock market had recovered much of its losses and the money had flowed out of the bond market as a result with the price of the benchmark bond closing 121 basis points off of it's high for the day.

More craziness this morning:  This morning the benchmark bond was up as high as 67 basis points with the thought that maybe the sell-off in the latter part of yesterday was an over-reaction and probably some betting that the initial jobless claims report would be week.  The report came in surprisingly strong and other economic news this morning surprised to the upside, for the most part, and the benchmark bond has sold off since.  It is currently of its lows of being down 21 basis points as it is currently down 4 as of this writing.  Here is a look at the chart from a few minutes ago:

Lots of volatility yesterday and today and with the geopolitical news adding to the instability, it's anyone's guess as to what will happen next.  We've seen a mixed bag of economic data over the last couple of days but the volatility will likely decrease from the craziness we saw yesterday and early this morning.  Rates are still amazing and much lower than any bond market expert would have anticipated at the beginning of the year.  It's a great time to lock in a low rate.  Please like, comment and share - I'd love to hear your thoughts on what's going to happen with rates.

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