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Thursday, September 17, 2015

Mortgage Bond Market Analysis - Decision Day

We are just moments before the bond release and in spite of some better-than-expected economic data the FNMA benchmark bond is up 20 basis points.  It closed up 11 basis points yesterday and had been in a very tight range until the last hour when it broker to the upside.  This move tells me that traders are anticipating there won't be an increase to the Fed Funds rate.  We'll find out soon if they are right (I believe they are) and then we will probably see a spike followed by some volatility with a general trend upward for bonds which means improvements in interest rates.

The data this morning came in better than expected with Initial Jobless Claims coming in at 264K vs. expectations of 275K.  It was mixed for the housing data with Housing Starts at 1.126mil vs. 1.170 expected but Building Permits slightly beating expectations with a reading of 1.17mil vs. 1.16mil expected.  To further confuse matters, the Philly Business Outlook Survey hit -6.0 vs. estimates of 6.3 (a huge miss) but the internals of this survey had some big upside surprises with employment at 10.2 vs. the prior reading of 5.3.  We will have the Fed decision a few minutes and I will update this post then.

BREAKING NEWS:  Fed leaves rates as is citing global economic concerns (probably including some concerns about our economy if we are being honest).  The benchmark bond is up 22 basis points - 2 basis points off its high and 2 basis points above the current 1st level of resistance which is 103.48.  The RSI has ticked up a tad but is still much closer to oversold than overbought.  As I'm writing this the market just spiked up and the benchmark bond is now up 35 basis point.  As information trickles out and traders digest what was said, we'll see some capitulation and volatility but I think the trend will be up.  Like I said yesterday morning, I'd float but always do so with caution and an eye on the bond market so that you can lock quickly if it moves against you.  There is only the Leading Economic Indicators tomorrow so you may be able to float through the weekend as we may see some follow-through buying tomorrow.  The 2nd level of resistance is at 103.67, 5 basis points above the current price.  The 200 day moving average is at about 104.1 so if the bond breaks through the 2nd resistance level, it has a bit more room to run.  As always, feel free to call me if I can help with anything mortgage related - 702-812-1214 or 801-853-8720.

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