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Wednesday, October 7, 2015

Mortgage Bond Market Analysis - Hump Day Edition

Well it's Hump Day (don't know why I like to capitalize it because it's not really an official day) which means we are just three days away from another big college football weekend with ESPN College Game Day broadcasting from the campus of my alma mater with my beloved #5 Utes playing Cal at 8:00 p.m. on Saturday night on ESPN.  Gotta love the big time.

As for interest rates and mortgage bonds, I recommended locking on Monday morning which would have been a good thing if you followed my advice.  The FNMA benchmark bond closed down 20 basis points on Monday.  Yesterday it bounced back a tad, closing up 9 basis points on no economic data to speak of.  This morning in an absence of data, the bond was down as much as 21 basis points at 104.35 and is currently trading at 104.39, down 17 basis points.  The RSI is hovering around overbought and the 1st level of resistance at 104.59 has proven to be strong.

Support levels are at 104.25 for the 1st level and about 104.18 for the 200 day moving average.  Tomorrow, like every Thursday, we get the jobless claims numbers.  At about 2:00 pm EDT the FOMC minutes will be released which will give us a better insight as to the Fed's thought process at the last meeting when they decided to keep rates where they were and it may help traders get a feel for what the Fed is thinking for the next meeting at the end of October; we are 3 weeks away from another FOMC meeting.  Friday has a couple of data points that may have a slight impact on bond prices but I don't expect moves to be really big unless there is some major global happenings which would typically be beneficial for interest rates as investors would move to the safety of bonds.

Locking at this point is not a bad idea since you never really know what's going to happen when the FOMC minutes are released though I don't expect much from this batch.  Rates are still great as well.  After a net sell-off since Monday of about 29 basis points based on the current pricing with the bond down 18 basis points right now, it is probably o.k. to float as long as you are paying close attention to the market - I'm always available to help out with that:  801-853-8720 or 702-812-1214.  Make it a great day and a better weekend.

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