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Monday, January 11, 2016

Mortgage Bond Market Analysis - No Data Monday

O.K.  So the title isn't 100% accurate.  The Labor Market Conditions Index came in at 2.9% vs. previous of 2.7% but this gets next to no coverage.  Tomorrow we get JOLTS which gets slightly more coverage and Wednesday we have a 10 year treasury auction and the Fed Beige Book; there are also 6 Fed presidents that will speak this week and traders will be listening intently to see if they can get any hints about the economy and Fed strategies from them.  I think trading will be non-dynamic at least until the auction unless there is something major in the international markets (China and oil prices will likely continue to dominate the headlines) or we have some big geo-political event.  The auction has the potential to influence bond prices one way or another depending on how well received it is.

The FNMA benchmark bond is 15 basis points off its high and 11 basis points off the day's low at 103.77 and is currently down 6 basis points.  The 2nd resistance level is 103.70 so it is still above that but hasn't really broken through with impunity yet - the 100 day moving average may now act as a support level.  Rates are great so locking now to protect yourself (or client) to the downside wouldn't be bad.  I don't know that there's much upside to floating since my guess is that the bond market will trade in a very narrow range until the auction.  Thursday and especially Friday will bring a fair number of data points including the PPI and some other important numbers.  If you decide to float, keep a close eye on the bond market so that you can act quickly if it moves against you.

I'm happy to help in any way.  Make it a great day and better week.  The college football national championship game is tonight:  Clemson vs. Alabama.  Who are you rooting for and who do you think will win?  I'm pulling for Clemson but I think Alabama will win.  I hope I'm wrong.  What do you think the score will be?  Comment on the blog or email ( me your entry - the person who guesses the right team and is closes in score wins lunch with me.

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