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Tuesday, June 9, 2015

Mortgage Bond Market Analysis - Make Up Your Mind!!

Like a roller-coaster, the bond market has capitulated wildly the last 4 days.  After recovering a bit yesterday, closing up 30 basis points, the benchmark bond is currently down 26 basis points.  There was some good economic news this morning, which is rarely good for bonds.  The JOLTS report which tells about the job openings came in higher than expected at 5.376mil vs. 5.038 expected.  The wholesale inventories grew which could mean that businesses expect to sell more product or that sales aren't keeping up with product.  Time will tell.  Finally, the NFIB Business Optimism Index came in at 98.3 vs. estimates of 97.2.  This typically doesn't have a huge impact on bond prices but it is a slight negative and the overall data is negative for pricing.

Rates are still great with FHA and VA loans in the low 4% range and paying some closing costs.  With a continually improving economy, I think rates are going to trend up.  We will have some opportunities to lock at lower points and when the Fed starts raising the Fed Funds rate, that may be one of those times.  Other times to lock will be when there's a big miss on economic data that impacts bond pricing such as most jobs-oriented reports.  Additionally, any major global incident like war will also be good as bonds are a safe-haven for investors.  With rates trending up, you may want to consider a long term lock if you are planning on buying in the next year - we can lock your loan for up to 1 year.  If you are in process, you may want to lock now to protect yourself from anymore downward movement in bond prices (higher rates) as long as you have the ability with your current lender to float the rate down if investors start buying bonds and pushing prices up.

The good news is that the benchmark bond is oversold AND the 2nd level of support (102.87) is holding relatively firm although the benchmark bond is currently 7 basis points below this support level and it is down 36 basis points on the day.  If it closes below the support level we may see some follow-through selling tomorrow, especially given the current level of the 10 year treasury bond which is at it's highest level (yield) in 8 months.  I would be safe and lock; if prices improve and rates go down, then float down or re-lock with another lender.  Feel free to contact me if I can help you with anything mortgage-related - 702-812-1214.  Make today great.

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