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Friday, February 6, 2015

Mortgage Bond Market Analysis - Non-Farm Payroll AND TGIF edition

Well there you have it.  I cautioned on Tuesday that we could be in for some bond selling which would push rates higher.  Yesterday we rebounded in the afternoon a bit but Wednesday and today are combining for a pretty decent sell-off.  Today there are three factors driving rates:  1) German manufacturing orders were up significantly more than expected at 4.2 vs. 1.5 - this is important because a big reason why rates have remained low is because of the weak European economy; 2) Non-farm payrolls came in at 257K which is well above expectations of 235K but below last month's reading of 329K; and 3) Average hourly earnings were up .5 vs. expectations of .3 and previous month's of -.2 - if people are making more, they can spend more.

The FNMA benchmark bond has been trending down this morning.  Since Tuesday's opening at 103.42, the benchmark bond has lost 102 basis points which is about .25% in rate.  Here's a look at the chart:

Since I took the snapshot if this chart, the bond has sold off a bit further and is now down 57 basis points for the FNMA benchmark and 38 basis points for the GNMA.  At 102.36, the FNMA benchmark bond is 25 basis points below the 1st level of support; the next support level is at 102.05 - 31 basis points below where it's at now.  Hopefully it doesn't drop that far.

What's on tap for next week?  There are no data releases on Monday and just a couple of minor things on Tuesday.  The Treasury budget is released on Wednesday and then Thursday and Friday give us a few things that can impact the market.  With the FNMA benchmark bond currently down 65 basis points, you can either lock now or see if we get a little bit of a rebound early next week.

Call me if I can help with anything mortgage-related.  Make it a great day and a better weekend.

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