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Thursday, August 13, 2015

Mortgage Bond Market Analysis - Jobless Claims Thursday, and other data

In addition to the weekly jobless claims numbers, we also have three other data points.   All of the data came in very close to expectations with one minor exception.  Initial Jobless Claims came in at 274K vs. expectations of 273K and previous of 269K.  Import Price Index came in at -.9 vs. expectations of -1.0 and previous of -.1 - this is anti-inflationary and good for rates.  Retail Sales ex-Auto came in at .4 vs. expectations of .5 and previous of .4.  Finally, Business Inventories came in at .8 vs. expectations and previous of .3.  So how is the mortgage bond market reacting?

After finishing the yesterday down 26 basis points (33 basis points off it's high) the FNMA benchmark bond is down 17 basis points at 103.55 - its low for the day.  In my morning post yesterday, I noted two things:  1) a recommendation to lock with my standard warning that if you are going to float, keep a close eye on the bond market - when I wrote that post, the benchmark bond was unchanged and dropped 26 basis points from there; 2) I pointed out a rather wide disparity between the FNMA and GNMA benchmark bonds with the GNMA substantially higher than the FNMA.  It closed up 6 basis points yesterday which was a 32 basis point disparity in price movement.  This morning is a different story with the GNMA also down 17 basis points.

At its current level, the FNMA bond is down 43 basis points from yesterday's opening which is the exact amount that it was up on Tuesday.  Additionally, at the open yesterday it was 6 basis points above the 2nd level of resistance and has now fallen 10 basis points below the 1st level of resistance.  With this sell-off, the RSI has dipped below the neutral level (50) and is now a tad bit closer to oversold.  As I mentioned yesterday, there are four more data points tomorrow.  Rates are still very good so you may want to lock ahead of their release just to be safe.  As always, if the data comes in much weaker than expected we could see some buying in the bonds which would benefit rates but that hasn't been the trend lately.  I will reiterate that if you do decide to float through tomorrow's releases, watch the market closely and be ready to react FAST.

In the meantime, feel free to contact me (702-81-1214 or if I can help you with a pre-approval or if you have any mortgage-related questions including how the mortgage bond market works - I get lots of those so don't be bashful; I'm happy to help / explain.  Make it a great day.

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