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Wednesday, January 13, 2016

Mortgage Bond Market Analysis - Hump Day Edition

Happy Hump Day.   As I mentioned in my post on Monday, Oil and China will drive the market for now.  Yesterday we saw a bit of a tipping point as oil dipped below $30 briefly though it closed at $30.56, down .85 on the day.  Some firms are calling for oil prices to go below $20 per barrel.  Commodities in general are down and some experts are thinking that deflation is more likely than inflation.  It could be a tug of war because as more people get jobs and start spending money, that will help inflation and obviously be good for the economy.

Europe has been a mess for a while as far as the economy and financial markets are concerned and with China having such big issues, equities are out of favor and the money is flowing from them into bonds in a big way.  Hence, the FNMA benchmark bond was up 40 basis points yesterday.  $21 billion of 10 year treasuries are being auctioned today; considering the appetite for bonds, my guess is that it will be well received.  That said, the bond is currently down 23 basis points, giving back more than half of yesterday's gains.  It's been hovering right around the 2nd resistance level of 103.72 which is strong because that's about where the 100 day moving average is.  The RSI is still overbought as well which provides even more impetus for the bond to sell off a bit with some profit taking.  While there is headwind, with the equities markets in shambles (the Royal Bank of Scotland - RBS - along with other firms stateside are advising clients to sell ahead of a major meltdown), investors are turning to bonds which may very well override the technical factors that usually play a big role in what traders do.  Further price declines in oil will also help push bond prices higher and rates lower.

I think it's safe to float for a bit with so much turmoil in the other markets.  With rates where they are, you can't go wrong by locking, especially if you have a loan closing in 15 days or less.  If you do float, as always, keep a close eye on the mortgage bond market so that you can act quickly if it moves against you.  I'm always available to help in anyway - 702-812-1214 or 801-853-8720 or  Make it a great day.

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