Mortgage Bond Market Analysis - THIHD edition

Well it's Hump Day (TGIHD) and in spite of economic data that missed the mark we aren't getting much love from the mortgage bond market.  After taking a beating yesterday (FNMA 3.0 benchmark bond finished down 63 basis points which is over .125% in rate increase) the bond is up 10 basis points this morning.  Every single data point was a miss vs. expectations this morning:

1. Building permits:  1050 vs. 1068 expected and 1060 previous
2. Producer Price Index:  -.8 vs. estimates of -.4 and previous of -.3
3. Housing Starts:  1065 vs. 1070 expected and 1087 previous
4. Industrial Production:  .2 vs. .3 expected and -03 previous
5. Capacity Utilization:  79.4 vs. 79.9 expected and 79.4 previous.

These numbers aren't horrible but they are misses and in some cases they are worse than the previous month's reading as well.  The GNMA benchmark bond which hasn't been hit as hard as the FNMA is selling off this morning and is down 31 basis points.  I just checked rates on a couple of FHA loans I'm working on and at 3.75% I'm still able to pay some closing costs for my client - I haven't locked yet because the loan isn't submitted - still waiting on the borrower for some things before we can submit.    Here's a snapshot of the chart from this morning:

What now?  I think that investors are looking to see the message in the FOMC minutes that will be released this afternoon.  The right message could encourage them to get back into the market and push rates down; of course, the opposite could happen as well.  Tomorrow, like every Thursday, we get initial jobless claims and jobs numbers of any type can always have an impact on what traders do regarding bonds and equities - of course our main concern is about mortgage bonds.  Tomorrow we will also get the Philly Fed Manufacturing Survey as well as the Leading Economic Indicators.  

I say it more often than not:  rates are still great.  They really are.  If you lock now, it's not a bad thing.  You may miss out on rate improvements tomorrow if the jobless claims warrant an improvement in the market - BUT - you may also protect yourself from higher rates if jobless claims come in lower than expected.  More importantly, you may protect yourself from any sell-off that may occur later this morning when the Fed minutes (FOMC minutes) are released which happens at around 11:00 a.m. PST.  Please let me know if I can help you in any way - 702-812-1214.  Make it a great day.