Happy Monday - at least for those who aren't heavily invested in the Chinese stock market. The 8.5% decline in the Chinese stock market got things off to a good start for the mortgage bond market but when Durable Goods Orders came in at 3.4 vs. expectations of 3.0 and previous of -2.2 and the numbers ex-transportation were .8 vs. expectations of .5 and previous of -.1, the bond market did an about-face and sold off a bit. The FNMA benchmark bond is currently up 13 basis points which is 8 basis points off its high for the day. The RSI is greatly overbought so from a technical standpoint, traders may decide to sell off and take some profits. That said, there has been a lot of soft data recently, today's data not withstanding, along with some things around the world that are supporting higher bond prices - like China's sell-off.
Commodity prices are much lower since the last Fed meeting which would suggest that inflation probably won't be getting up to the 2.0% target anytime soon. When you couple this with mixed data and uncertainty in Greece (among other places in the world) then it will be hard for the Fed to spin the need to start increasing the Fed Funds rate sooner rather than later. We have the Case-Schiller Home Price Indices tomorrow and Pending Home Sales and Consumer Confidence on Wednesday which is capped off by the interest rate announcement from the Fed at about 2:15 EDT on Wednesday. I would probably float through the announcement because there is a fair chance that the bond market might find more reason to buy bonds, pushing prices up and rates lower. As I always say, if you are going to float, watch the market closely so that you can react quickly if there is a sudden move for the worse.
Completely off topic: While browsing through my newsfeed on facebook this morning, I came across this video. It's short, about 1:20ish, but it is very inspirational and just a great feel-good video. I hope you enjoy it and that it touches you the way it touched me: Kids sing song for teacher with breast cancer.
Make it a great day and feel free to call me if I can help with anything mortgage-related - 702-812-1214.