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Thursday, February 26, 2015

Mortgage Bond Market Analysis - My Son's 14th Birthday edition

Happy 14th birthday to my son though his birthday isn't doing much to move the market and neither is the economic data that was released this morning.  I often find it funny what the market chooses to focus on.  For instance, Durable Goods Orders blew away expectations, coming in at 2.8% increase vs. 1.7% expected, but ex-transports it missed expectations, coming in at .3% vs. .5%.  January CPI came in at -.7% vs. expectations of -.6% and core CPI was .2% vs. expectations of .1% (non-existent inflation means there is no reason for the Fed to raise interest rates) and this is very bond market friendly.  Finally, Initial Jobless Claims came in at 313K vs. expectations of 290K.  This is a big miss and should be pushing bond prices much higher except for the durable goods orders that came in so much higher.  However, the main DG numbers that investors usually focus on are the ex-transports but that's not where the focus is this morning.  Normally, with CPI numbers and jobless claims numbers where they are, we'd be having a much bigger day but the benchmark bond is well off the morning high by 29 basis points.

Considering that investors pushed the bond higher in the early morning and then sold off when the data came out, I would be cautious if you float.  Here's a peak at the chart:

The RSI is at about 50 - midway between overbought and oversold so this is a non-factor right now.  The resistance level of 101.97 is proving to be quite strong as it was tested yesterday and failed to close above it and it was tested again this morning and has held up so far with the benchmark bond currently trading down 7 basis points on the day at 101.82 which is 39 basis points off its morning high.  The first level of support is 101.46 so there's a bit of a ways to go if the bond market sells of big which I don't expect to happen.

Tomorrow is another decent data day with GDP, Chicago Purchasing Managers's Index, Consumer Sentiment and Pending Home Sales.  The market could move again with any surprises but with what it has done so far this morning, I would watch the market like a hawk if you are going to float.  Make it a great day and feel free to contact me if I can help with a mortgage - 702-812-1214.

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