Happy 2nd business day of the week. With some slightly better-than-expected data yesterday the FNMA benchmark bond closed down one, 1, uno, un, ichi (whatever language you want) basis point. This morning we had some data that barely missed expectations and we are down 7 basis points. The RSI is getting really close to oversold but I'm not sure that will matter very much. I think that the bond traders are thinking they are living on borrowed time. The last two Fed votes came in at 9-1 in favor of leaving the Fed Funds rate unchanged yet the hawks are circling and squawking about how it's time to start raising rates. The fact that we have been in a tight channel with a somewhat substantial downward move last week leads me to believe that traders are buying into the whispers of a Fed Funds increase in December.
In the game of musical chairs, you don't want to be the one standing when the music stops and you get the feeling that the traders are trying to maximize their profits while being able to have a seat when the music stops (Fed starts raising rates). Certainly arguments can be made that the rate should probably stay where it is until sometime in 2016 when we hopefully see a real recovery - we see good data on occasion but some of the related data points don't back it up so it's quite nebulous at this point. For instance, consumer confidence numbers have been quite high but consumer spending has been week. In an economy that is truly recovering, consumers who have confidence, spend. There are other things like this in the jobs sector as well as the building numbers.
Speaking of JOBS, it is JOBS week. Tomorrow kicks off the jobs data with the ADP Private Payrolls report. Thursday we get Jobless Claims, just like every week. Friday we are blessed with Non-farm Payrolls and the Unemployment Rate. We also get the ISM Non-manufacturing (Service Sector) Index and we get to hear from Janet Yellen tomorrow. I would probably lock now and if the market improves, I would float down if your lender offers that option (we do). There's more risk to the down side (and a greater likelihood of a sell-off) than there is potential for reward to the upside. I'm here to help in any way I can. I can be reached at 702-812-1214 or 801-853-8720. Make it a great day.