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Monday, January 5, 2015

Mortgage Bond Market Analysis - Back to Life edition

Happy Monday Morning and welcome back to normal life.  Schools back in session and the holidays are officially over.  It's the first Monday of the new year and time to ramp up the efforts to make this year a better year than last year.  After a nice rally in the mortgage bond market last week, it continues this week with commodity (oil) stocks dragging down the broad market stock indexes and driving a flight to safety / quality.  There is no data out this morning but Total Car Sales numbers will be released this afternoon at 1:00 PST.

The benchmark FNMA bond is currently up 33 basis points at 104.89 - 19 basis points above the 2nd level of resistance.  The RSI (relative strength indicator) is bumping its head against the overbought threshold but it's not there yet.  An analyst from CITI came out with a note regarding crude oil where he dropped his target price for crude oil to $63 per barrel from $80.  He said there were three "massive" factors for this:  1) US shale revolution, 2) Saudi refusal to cede market share to other producers and 3) a weak world economy.  The equity markets are currently down about 1% which is almost always good for bonds and it definitely is in this case.  Here's a look at this morning's chart:

Prices have improved a bit since I took a snapshot of the chart.  It's a great time to lock and take advantage of the gains that we've seen over the last 7 days.  We may see more upward movement in prices (which is good for rates) but we could also very well see some profit taking with the 114 basis point run in the last week based on the chart.  I always try to error on the conservative side when it comes to locking and one of my mantras is "Don't be greedy."  If you lock in a rate now, you may not get the absolute lowest rate (but you might) but you will love your rate over the course of your loan.

New feature in my blog this year:  In order to add even more value to the reader (Realtors / borrowers), I will be finishing my posts with what's on the economic calendar for the next day.  Up tomorrow morning is ISM Non-Manufacturing (service) which is expected to come in at 58.5 (below last month's 59.3 but anything above 50 shows growth and strength in the economy).  Additionally, Factory Orders are expected to come in at -.4 which is weak but would be an improvement over last month's reading of -.7.  Finally we get the IBD/TIPP economic optimism index - this isn't a big thing but the trend is up and last month's reading was 48.4.

Please feel free to share your thoughts in the comments section.  To make sure you get this information every morning (at least on the mornings I write it) you can either subscribe to my blog or you can like The Wunderli Team facebook page.  Please feel free to call me if I can help you or a client / friend with a mortgage:  702-812-1214.  Make it a great day, week, month and year.

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