Mortgage Bond Market Analysis

Down again after losing 38 basis points yesterday, I think the investors are positioning themselves for good economic news on Wednesday through Friday - at the very least, they are hedging their bets.  As I mentioned in my post yesterday, the market was trending down and could possibly continue that trend throughout the day - which it did.  This morning, the FNMA benchmark bond is 16 basis points off the morning low and is capitulating in a relatively narrow range but is still down 6 basis points as of the time I took the snapshot of the bond chart.

We have some big data points Wednesday through Friday, just like we do the first week of every month.  If the data is economically positive, it will be rate-negative.  We've seen a lot of mixed data recently and last Thursday we got a good surprise, as far as rates are concerned, when initial jobless claims came in quite a bit higher than expected.  Unfortunately, the market closed down 26 basis points that day when investors chose to focus on other data or to believe that this was just an anomaly.  We've got four very important job-oriented releases this week with ADP private payrolls tomorrow, Initial Jobless Claims on Thursday, and non-farm payrolls and the unemployment rate on Friday.  There is other data as well and it will be interesting to see how it all plays out.  Here's the snapshot of the chart this morning:

As it stands right now, the current bond price is about right in the middle of the 1st levels of support and resistance and the RSI is at about the 50 mark, also right in between overbought and oversold.  It's all about the data at this point.  What's your strategy?  Are you going to hedge and lock now or are you going to roll the dice and see if you can get some big gains in the form of bad economic data that leads to investors buying bonds and pushing rates lower?

I'll be in Utah the next couple of days for a seminar so my coverage won't be quite the same but I will try to have some commentary on the data releases and their impact on rates.  Feel free to contact me if I can help with anything mortgage related - 702-812-1214.  Make it a great day.