Happy Monday. I hope you had a great weekend. It's a fairly light week for data with nothing very important until we get to Thursday and Friday. Thursday brings Jobless Claims and Import Prices and Friday we get Retail Sales, Business Inventories, Michigan Consumer Sentiment Index and, most importantly, the Producer Price Index. The PPI along with the CPI we get on the 15th will likely weigh heavily on the Fed's decision on the 16th along with the (strong) jobs numbers from last week.
In my post on Friday I said that the charts were looking like the bond would likely trend higher throughout the day, which it did, closing up 25 basis points and getting back some of the losses from the previous days. We get Labor Market Conditions Index and Consumer Credit Change today but this data isn't likely to have much influence on bond prices. We have some headwind with the first level of resistance at 103.48 roughly the same as the 25 day moving average (the FNMA benchmark bond just broke through this level and is at 103.52 - we'll see if it can close above this level). The 2nd level of resistance is even stronger at 103.72 with the 100 day moving average also being right at that level.
While the likelihood of a Fed rate hike isn't as strong as it was before Janet Yellen's comments last week, I think trader's are still very skeptical about the situation. We will have a better idea by the end of the week and again after the CPI is released next Tuesday but waiting to lock until then is dangerous. We've had a nice little recovery on Friday and this morning and I would take advantage of it and lock if I haven't locked yet. Don't hesitate to contact me if I can help in anyway - 702-812-1214 or 801-853-8720. Make it a great day.