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Wednesday, August 5, 2015

Mortgage Bond Market Analysis - Hump Day Blues (if you didn't lock)

Happy Hump Day - that is if you locked on or before Monday per my recommendation.  Last Friday I recommended to lock based on a couple of things:  1) the bond market was severely overbought and 2) there was a lot of data coming out this week that could very well spur a sell-off.  On Monday, I again recommended to lock if you (your client) didn't lock on Friday.  Yesterday there was a big sell off with the FNMA benchmark bond retreating through the 2nd and 1st resistance levels respectively; because of this the RSI is now no longer overbought.  The main cause of the sell-off was due to comments from one of the Fed Presidents who said they want to raise rates (the Fed Funds Rate) sooner rather than later.

While the ADP Private Payrolls report was weaker than expected coming in at 185K vs. estimates of 220K and previous of 229K.  While you might think this would be a big positive for pricing, there has been a bit of a disconnect between this and the non-farm payrolls report we will get on Friday and traders put much more weight into that report.  The real killer today is the ISM Non-manufacturing Index (the services sector which is about 2/3s of our economy) which came in at 60.3 vs. estimates of 56.3 and previous of 56.  This supports the Fed president's comments about raising the rates yesterday.  The results for yesterday and thus far today was a 50 basis points sell off for the FNMA benchmark bond and it is currently down 28 basis points.  The total of these two days is approaching an increase in rates of about .25%.  We may have more to come depending on what the data shows tomorrow and Friday.

You know I try to add value anywhere I can and I do this with my free mortgage report as well as with some education and analysis via a couple of spreadsheets I developed (as well as some marketing strategies / and help for my Realtor partners).  I also add value by understanding the mortgage bond market and how the various data can impact the movements.  If your loan officer isn't doing these things for you, please consider calling me if you, a friend or client needs a mortgage.  If you have any questions, please feel free to call me at 702-812-1214.  Make it a great day.

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