It's Thursday morning and if you've been reading my blog for a while, you know that means Jobless Claims Thursday. Let's first find out what happened yesterday and why. The FNMA benchmark bond closed up 38 basis points yesterday which translates into just under .125% improvement to rates. On Tuesday, I recommended locking ahead of yesterday because of the potential for sell-off and there was some big potential. In fact, the sell-off had begun in the morning when the CPI was released - while it came in rather tame on the surface, up .1% in both the core and the headline numbers vs. expectations of .2% for both and the YOY came in at 1.8%, below the 2.0% target for the Fed even though that's not their true measure of inflation, there is a component of the CPI that caused concern for the Fed and led to an initial sell-off. Real Average Earnings were up 2.2% from 1.8% previous and the Fed has been very clear that they are giving a lot of weight to wage inflation.
Comments from a Fed president followed by Fed minutes that were more dovish than hawkish led to bond traders buying bonds which, as you know if you read my posts, push prices higher and interest rates / yields lower. With the solid gains, the RSI ticked up just above the half-way point ending slightly closer to overbought than oversold. This morning the Weekly Jobless Claims came in at 277K vs. expectations of 272K and the more closely watched 4-week moving average is 271.5K vs. previous of 266K which is slightly beneficial for rates. The Philly Fed Manufacturing Index came in at 8.3 vs. 7.0 and the employment component of that index was up strong at 5.3 vs. -.4 previous. July leading economic indicators came in low at -.2% vs. estimates of .2%.
Overall this is some decent news and could put pressure on the bond. That said, the FNMA benchmark bond is currently up 8 basis points at 103.91 - 8 basis points above the 1st level of resistance. The 100 day moving average is also about where the 1st level of support is. It is very important for the bond to close above the resistance level in order to have some more follow-through tomorrow. If it closes close to or below the resistance level, we could be in for a bit of a pullback tomorrow. I would float for the time being but, like always, I'd watch the market very closely so that if it turns, you can lock very quickly to preserve the current gains. As always, please feel free to contact me if I can help with anything mortgage-related - 702-812-1214 or 801-853-8720. Now it's off to get my daughter moved in to her dorm to start college at the University of Utah - my alma mater. Go Utes and go Jordan.
Finally - not to get lost in the shuffle, it's our 21st anniversary for my wife and me. Go us. Make it a great day.