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Monday, November 3, 2014

Mortgage Bond Market Analysis - Happy November Edition

The mortgage bond market is off to a rocky start this month with the benchmark bond currently down 14 basis points on the day at 103.22 and 58 basis points over the last 13 trading days.  The benchmark bond is oversold and could get a lift from investors who may start to believe that this is a good buying opportunity - I'm not confident that will happen since I believe it is oversold more because of the prolonged decline not because of how much it has declined.  Considering how big the run-up was, I think we could break through some support levels especially if the economic data and geopolitical climate become more positive.

Here's a look at the chart today:

There's a fair amount of economic news / data releases on the calendar this week with some of the highlights being the ADP private payroll report on Wednesday, the jobless claims on Thursday and the employment report on Friday - this is the biggie.  If Friday's report has a number over the expected 231K then we could see some sell-off in the bond market with rates moving higher.  Additionally, jobless claims numbers have been on the decline and some good numbers (for the economy, not rates) on Thursday could also provide impetus for a sell-off of the benchmark bond.

Rates are great and there is reason to float but I would only float in the very near term - I'm not a gambling man so I would most likely lock my loan (if I were in the process of doing one) before Thursday's jobless claims numbers and certainly before Friday's non-farm payroll report.  Please feel free to call me if I can help with anything mortgage related.  I'd also love to have you share your thoughts in the comments section.  Please like and subscribe as well.  Make it a great November.

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