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Tuesday, October 20, 2015

Mortgage Bond Market Analysis - Little data and it's mixed.

Happy Tuesday.  The Mets are up 2-0 in their 7 game National League Championship Series with the Cubs (game 3 is tonight - go Mets) and the University of Utah Utes are 6-0 and ranked #3 in the AP poll with 16 first place votes and #3 in the College Football Power Index - this is the kind of data I like, and it's not mixed.  Conversely, the NAHM Home Builder's Sentiment Index came in at 64 yesterday vs. estimates of 62 (this is a 10 year high).  This isn't a big factor in pricing and neither is Housing Starts which came in at 1206K vs. estimates of 1150K or the contrarian data of building permits that came in low at 1103K vs. estimates of 1170K - this is a precursor for housing starts.  This is all of the data for today and there is no data tomorrow so traders are looking for the next big news that will provide them with direction.

For now, the 1st resistance level at 104.56 has proven to be strong with a couple of attempts to break through getting beaten down.  The RSI is closer to oversold than over bought so that's a good thing and the support level of 104.3 is fairly strong so I would expect to see the FNMA benchmark bond trade in a very narrow range until some important economic data or a big geo-political even breaks us out of the narrow range we are in.

Thursday brings us the European Central Bank policy statement which could have an impact on bonds as well as the weekly jobless claims data.  Additionally, we get Leading Economic Indicators as well as Existing Home Sales.  The benchmark bond closed up 12 basis points yesterday at 104.54 - 2 basis points below the 1st resistance level.  This morning, the bond is down 15 basis points and based on today's chart, I would guess that the bond will finish somewhere around where it's trading right now.  I would float with caution and be ready to lock if there is a quick move to the downside.  Call me if I can help with anything mortgage related at 702-812-1214 or 801-853-8720.  Make it a great day and go Mets.

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