Mortgage Bond Market Analysis - Monday Morning SLAM

I hope your weekend was better than what the bond market has been doing over the last three days.  Beginning with an old-fashioned beat-down last Thursday, the market is in day three of a down-turn that has wiped out the gains of the previous 4 days.  Over those 4 days we saw 120 basis points of which is a bit more than .25% in rate.  The last 3 days has seen a sell-off of 127 basis point to our current level of 102.35.  The silver lining in the dark cloud is that the FNMA benchmark bond is taking the brunt of the hit - down 42 basis points so far this morning - while the GNMA bond (thought to be a safer investment since it's backed by the government) is only down 1 basis point.  Another small silver lining is that the FNMA bond is 23 basis points off its morning low.  Here's a snapshot of the chart:

The FNMA benchmark bond is now below the 1st level of resistance (102.42) by 7 basis points at 102.35.  Providing fuel to the fire is the fact that it looks like Greece is getting another bailout and making more promises to repay their debt.  Over the weekend, EU leaders agreed to give (lend) Greece 86 billion euros ($96 billion) which is dependent upon Greece accepting an increase in austerity cuts which its citizens voted against last week.  The other thing to keep in mind is that Greece is in a recession and more cuts may send it deeper into a recession.

This saga isn't over because they still need to vote and there's certainly no guarantee that they make any payments - they've defaulted so far.  There are other geo-political things that could influence the markets including the Iran nuclear deal.  Stateside, we continue to see mixed data and even though some of the more prominent data is looking better, data that's a bit less public like the workforce participation rate (a datapoint that I think is at least as important as the unemployment rate) shows that our economic recovery has a long way to go.  As I said last wee before the down-turn, if you are going to float, do so with caution and be ready to lock at a moment's notice.  With as much sell-off as we've had over the past few days (the RSI is getting close to oversold), we may see a respite so floating (cautiously) may be a good thing but if things continue to improve for Greece, you will need to lock quickly.  Feel free to call me (702-812-1214) if I can help with anything mortgage-related.  Make it a great day.