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Thursday, March 10, 2016

Mortgage Bond Market Analysis - Jobless Claims Thursday

It's Jobless Claims Thursday but there's lots of other stuff influencing the market.  Oil's up a bit so that's putting pressure on bonds - and they are selling off.  However, usually when oil's up, the stock market is up but it's down as well; it's not typical for both stocks and bonds to be down on the same day but it can and does happen.  Usually money flows from one to the other pushing prices higher where the money is flowing in.

Initial Jobless Claims came in better than expected at 259K vs. expectations of 275K.  Continuing claims also came in better at 2,225K vs. 2,255K.  With the good jobs data that was released last week, I kind of thought that jobless claims would come in better than the meager expectations.  This is weighing a bit on the bond market along with oil.  Contrarily, The ECB lowered their key interest rate and the deposit rate which is providing some support for bonds and keeping them from selling off too much.  The FNMA benchmark bond sold off 34 basis points yesterday and broke through what was the first support level of 101.90 (it closed at 101.82).  It is currently down 9 basis points, 7 basis points off the morning low but it is still below the new 1st support level of 101.77 at 101.73.  The bond has sold off 90 basis points from the open on February 26th which is about a $900 cost to borrowers or about a .25% increase to the rate.  The current price is testing the 50 day moving average but the RSI may provide some support if traders believe the bond is oversold and, thus, a good investment opportunity.  I wouldn't buy that argument since oil is driving that bus.

I reiterate what I've been saying recently, floating is risky and I would lock to be protected from an increasing amount of good economic data that will drive bonds down further pushing rates higher.  It won't take much more selling for the benchmark bond to switch back to the FNMA 3.5 from the current 3.0.  As the economy improves, oil is likely to continue it's upward price climb which will adversely impact bonds.  The 10-year treasury broke through a key level of 1.93% and is now at 1.94% so that's yet one more thing to consider.  As always, feel free to contact me if I can help with anything mortgage related:  702-812-1214, 801-853-8720 or  Make it a great day and Go Utes!!  That's my alma mater and favorite college team for those who don't know.

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