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Monday, April 4, 2016

Mortgage Bond Market Analysis - Economic Data and the Final Four

It's Monday and the NCAA Championship game is tonight with North Carolina and Villanova going at it for all the marbles.  Villanova played Oklahoma on Saturday to see who would make it to tonight's game.  They had lost by 20+ points to Oklahoma during the season and because of that, no one would have expected what happened in the rematch - Villanova won the game 95-51; they shot 71.4% from the field while holding Oklahoma to under 32%.  Depending on whether Villanova winning is good for the economy or bad, mortgage bond rates would have either gone up in a big way or gone down big-time.  Of course, that game didn't have much to do with the economy other than at the books in Vegas and in the pockets of those who bet big money of Villanova.

So let's take a look at some data that does mean something for mortgage bonds and interest rates.  Factory Orders came in as expected, down 1.7%.  Labor Market Conditions Index were better than expected at -2.1 (expected -2.4) but worse than the previous reading of 1.5.  Overall, this data is positive for bonds / rates.  Remember that bond prices and interest rates move inversely to one another, which is to say that if traders are buying bonds pushing their prices higher, the rates / yields on those bonds goes down.  Tomorrow we get JOLTS and the ISM Non-manufacturing Index (important).  Wednesday will bring us the FOMC Minutes in which traders will be looking for clues about what the Fed is thinking with regard to when they will raise rates and how much they will likely raise them over the next year or so.

At 102.73, the FNMA benchmark bond is up 5 basis points this morning and is at it's highest level since February 12th which was it's highest point since February 9, 2015.  When I say that rates are great, they really are.  The RSI is showing that bonds are overbought.  A few experts have a float recommendation with a warning to keeping your eye on the market in case of a sell off (if you don't have my app - buyerZapp - you can install it by clicking on the link in the upper right hand corner of the blog) - if you decide to float you run the risk of missing out on some of the recent gains if the bond suddenly sells off and you don't have a way of keeping on top of what's going on.  Oil is down a bit today which is helping the bond in addition to the somewhat weak economic data.  However, with a trend of improving data and oil near its recent lows, I don't know if there's a whole lot of room for bonds to improve.  I would play it safe and take advantage of the current peak and lock.  If you do decide to float, keep your eye on the market.  Contact me if you want up-to-date information regarding the bond and rates - 702-812-1214, 801-853-8720 or jed.wunderli@noblehomeloans.com.

Make it a great day and a better week.

1 comment:

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