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Monday, August 17, 2015

Mortgage Bond Market Analysis - Happy Monday

It's Monday and we've got two conflicting data points.  The National Association of Home Builders Housing Market Index came in as expected at 61 vs. previous of 60.  This is the highest reading in about 10 years and anything over 50 is expansionary.  Conversely, the NY Empire Manufacturing Index came in at -14.92 vs. expectations of +5.0 and previous of +3.86.  This is a big miss and is probably one of the reasons why the benchmark bond is up 19 basis points as I write this.

On Friday I recommended floating with caution.  The benchmark bond finished down 13 basis points - not a big deal but down nonetheless.  Tomorrow on the data front we have Building Permits and Housing Starts.  It's doubtful that these will have much impact on mortgage bonds or interest rates.  Wednesday, however, might be a very different story.  The CPI is released on Wednesday morning but the potentially big mover is the FOMC minutes.  I would lock by the close of business tomorrow afternoon as Wednesday could be quite volatile and we could see some sell-off in bonds (pushing rates higher) depending on the content of the message in the Fed minutes.

From a technical standpoint, the benchmark bond (103.54) is currently 11 basis points below the 1st level of resistance (103.65).  Should we have some sell-off, the first level of support is 21 basis points below the current level at 103.33.  The RSI is just above 50 which is just a tad closer to overbought than oversold.  Feel free to contact me if I can help with anything mortgage related (702-812-1214 or 801-853-8720).  Make it a great day.

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