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Wednesday, March 9, 2016

Mortgage Bond Market Analysis - Hump Day and the Oil Yoyo

It's Wednesday and that means we are getting into full swing with the NCAA college basketball conference tournaments - Go Utes!!  As for mortgage interest rates and the mortgage bond market that determines the rates, there was one economic data point this morning:  Wholesale Inventories came in much stronger than expected at .3% vs. -2% expected.  This is quite negative for pricing and will certainly raise expectations for a higher GDP.  Oddly enough, the FNMA benchmark bond has bounced off it's morning low of 101.83 and is currently down just 17 basis points at 101.99.  It was up 23 basis points yesterday and if you read my post on Monday I recommended locking on any gains which you should have done yesterday.  When the bond is in a (tight) trading range and when there is a lot of reason or potential for the bond to move higher, floating overnight isn't a good thing since things happen like this morning where the previous day's gains are all erased with no chance to lock at the previous day's pricing.

Yesterday the 1st resistance level of 102.21 was tested and it held while the 1st level of support was tested on Monday morning and this morning and so far it has held both days.  The RSI is right at the oversold threshold so all else being normal, that could influence some buying but traders are putting much more emphasis on oil and the weakness in China.  For instance, yesterday oil was down in a big way which is why the bonds did well.  This morning, oil is up strongly (though not up as much as it was down yesterday) so the bonds are selling off.

Later today there is a 10 year treasury auction and tomorrow morning we get Initial and Continuing Jobless claims (just like every Thursday) and, probably more importantly, we get Mario Draghi's statement from the ECB.  Of course oil will have a say with what bonds do tomorrow as well.  It is possible that Draghi might say something that moves the bond out of its trading range but if his comments don't do it, I doubt jobless claims will.  If oil continues to push higher, it will take rates with it but I'm not really confident that oil traders are sold on oil going much higher until they really see a legitimate slowdown in production with an increase in demand.  We may be stuck in this range for a little while.  That said, I still wouldn't float - there is more risk and likelihood that rates move higher and floating on the hopes of picking up a little better pricing probably isn't prudent.  Download buyerZapp - top right hand corner of my blog page - so that you can keep current on interest rates and mortgage bonds plus you get a handy mortgage calculator as well.  Contact me if I can help with anything mortgage related.

If you would like to get my free report "How to Avoid the Most Common and Costly Mistakes When Getting a Mortgage:  Making the Best Choice for Your Financial Future," email me at - put Free Report in the subject line.  Make it a great day and a better week.

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