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Monday, November 30, 2015

Mortgage Bond Market Analysis - Monday Morning Blues

Happy Monday.  I don't have the blues but if you don't lock before the jobs data comes out later this week, you might.  If you are reading this because of the link in my email - surprise!!  There is data - just wanted to see who clicks through the link.  October Pending Home Sales missed estimates of 1.0% with an actual reading of .2%.  That pesky Chicago PMI is below 50 again with a reading of 48.7 vs. estimates of 54.  This hasn't had much impact on pricing since the real focus is on the jobs data.

Right now it seems like we are living on borrowed time with a likely hike in the Fed Funds rate coming on December 16th.  This is jobs week (like the first week of every month) and the data we get on Wednesday, Thursday and Friday (especially the last two days and especially on Friday) will tell us a lot with regard to whether it will actually happen or whether it will be pushed back until 2016.  No trader wants to be caught with their pants down, or be the last one to turn out the light or get caught holding the bag, or any other cliche that would fit.  I think they are trying to squeeze whatever profit they can out of their current strategies before they have to shift into a different methodology.  If I were a bond trader, I'd probably be shorting bonds in advance of the possible Fed move.

My guess is that if we see some good jobs numbers, we will likely see some more selling in advance of the Fed meeting which is on the 15th and 16th with the rate decision being announced on the 16th.  The RSI shows the FNMA benchmark bond is overbought and we are on our 5th day in a row of gains with the bond up 4 basis points today.  The gains have been extremely week at best with the bond up 13 basis points since last Monday's opening.  I would lock ahead of the Wednesday morning ADP private payrolls report but if you happen to float (or can't lock because you aren't in a position to lock) then it's increasingly important to lock by Thursday and then Friday with each new day bringing more important data as far as the Fed is concerned.  Rates are still really good and from a long-term perspective, will likely remain low relative to the long-term average of 30-year fixed-rate mortgages, but if you want the best rates, lock sooner rather than later.

I hope you had a great Thanksgiving weekend and that your December is awesome - can you believe tomorrow is already the first day of December?  Make today great.

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