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Wednesday, January 27, 2016

Mortgage Bond Market Analysis

It's Hump day and it's also Fed interest rate decision day.  I don't expect the Fed to raise rates today and would certainly be surprised if they did considering all the wealth we have lost in the sell-off of the stock market since they raised the rate in December.  The Dow was down as much as 179 points and is now up 33 points.  The NASDAQ and S & P were also down but are now up.  I have now doubt that this is in anticipation of some words that will be calming for the market.  There is at least one economist that thinks the Fed will be backed into a corner that requires them to implement another round of quantitative easing - #4.  Check out Dow 25,000.

Yesterday, January Consumer Confidence came in at 98.1 vs. estimates of 96.8 and previous of 96.5.  This is a very strong number and would normally be negative for pricing which means higher rates but with the Fed announcing today, traders weren't / aren't making any big moves.  The FNMA benchmark bond finished up 2 basis points yesterday and is currently down 11 basis points right now.  We will get the announcement from the Fed at 2:15 EST.  My guess is that we will hear comments that will push equities higher and it might very well be an anomaly day where we also see interest rates get better.  However, rates are probably a bit better than they should be due to expectations of a dovish tone from the Fed - you know how bad manufacturing numbers are if you read my blog on a regular basis and we'll get Chicago PMI on Friday which is expected to be very weak - so we may not see much improvement if all we get from the Fed is what's already been priced into the market and what's expected.  There's probably more risk to the downside as far as bond prices are concerned so to be safe, I would probably lock ahead of the Fed announcement.  It's rare that we lock, or buy stocks or houses, at the perfect time so don't be greedy; recognize a good thing when it's there and rates are very good.  If rates improve enough, you might be able to float down or renegotiate your rate if your lender offers that - I do.

Contact me if I can help in with anything mortgage related - 702-812-1214, 801-853-8720 or  Make it a great day.

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