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Wednesday, April 27, 2016

Mortgage Bond Market Analysis - Alert to LOCK: Read all the way to the END.

The Fed Interest Rate Decision was just announced and there is no rate increase.  However, the tone is more hawkish than previous comments as they see the global economic risks as less threatening.  Since the market had not priced this in, this is negative for pricing and bonds have sold off since the decision was made public.  The fact that oil is up again is not helping.  Lock ahead of a potential reprice just to be safe.

On the data side, Pending Home Sales came in at 1.4 vs. estimates of .5 - this isn't a factor in pricing because the focus is on the Fed (and oil to a lesser extent today).  Tomorrow we get Jobless Claims and Gross Domestic Purchase Price Index.  Oil will continue to influence bond pricing and traders will now start trying to figure out if the Fed will raise rates at the June meeting or if it will be after that.  That's all for now.  Make it a great HUMP day.

EDIT:  after absorbing the information, traders have done an about-face of their knee-jerk reaction and have started buying again - the FNMA benchmark bond is now up 7 basis points where it was flat just a few minutes ago.  This is not a big swing but it was a quick sell-off when the announcement was made.  It's probably o.k. to continue floating.  If you do float - keep an eye on my app - buyerZapp - in case the market moves against you.

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