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Wednesday, February 10, 2016

Mortgage Bond Market Analysis - Hump Day and Yellen and a look at the chart

It's Hump Day and we get to hear from Fed Chief, Janet Yellen.  Since December 30th's open, the FNMA benchmark bond (which was the 3.5 back then but has switched to the 3.0 since, indicative of falling rates) has gone up 308 basis points (today's monthly rollover aside).  Between oil prices that are well below where the market would like to see them (the glut is the major cause while economic weakness isn't helping), key economic data that has been very weak for far too long and global economic weakness, stocks have been crushed (my kids' college funds have taken a real beating) but at least bond prices, and by default, mortgage rates have benefited.  Let's take a look at the chart.

One thing that stands out is the huge and almost straight run-up with just a few minor setbacks.  From a technical standpoint, there is a lot of resistance to move higher with the RSI still above the overbought line and the 1st resistance level just a few basis points above the current price and the 2nd resistance level just 25 basis points above that.  Certainly some bond traders are getting anxious to pull some profits off the table as well.  That said, Yellen said that global economic weakness pose risks (this comment is good for bond pricing and interest rates) but that she thinks the US will motor through (this comment is not so good).  The bond traders and the equity markets are paying more attention to the first part of her comment as the bond has improved since her comments while the stock market as sold off.

Tomorrow we get Jobless Claims and Part 2 of Janet Yellen.  Friday brings some important and / or interesting data with Retail Sales, Import Price Index, Business Inventories and the Michigan Consumer Sentiment Index.  I would continue to float if you or a client has a loan closing 15+ days out.  If the closing time is less, take advantage of the great run-up and lock that rate.  If you float, make sure you keep a watchful eye on the market just in case there is a rapid move against you.  I'm always available to help with anything mortgage related - 702-812-1214, 8801-853-8720 or  Make it a great day.

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