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Friday, April 15, 2016

Mortgage Bond Market Analysis - Mostly Weak Data Has FNMA Bond Recovering

Happy Friday.  The New York Empire Manufacturing Index started the data releases off with a bang coming in at 9.56 vs. expectations of 2.21 and previous of .62.  This followed yesterdays strong Initial Jobless Claims reading of 253K vs. estimates of 268K which continued the trend of good jobs numbers.  The CPI came in a bit lower than expected at 2.2 vs. expectations of 2.3 but still above the Fed threshold of 2.0.  Then come the surprises.  Industrial Production was down with a reading of -.6 vs. estimates of -.1 and Capacity Utilization was 74.8 vs. expectations of 75.5.  The really big miss, though, was the Michigan Consumer Sentiment Index which came in below 90 for the first time in a long time with a reading of 89.7 vs. estimates of 92.  This is quite surprising considering the increasingly good jobs data we've been having over the first 3.5 months of the year but the fact that it hasn't translated to consumer spending, this number makes some sense.

Yesterday the FNMA benchmark bond closed down 17 basis points on the strong data but has made most of that loss back this morning.  It is currently up 15 basis points at 102.62, 11 basis points of the morning high.  The RSI is a non-factor as it is hovering around the mid-point between overbought and oversold.  It looks like the bond is trending up for the day but the most recent down tick might break that trend if the price goes below the most recent low (which was above the previous most recent low).  That said, I would lock before the end of the day since the oil czars are meeting on Sunday in Qatar and if they decide to curb production then oil prices will go up and that is bad news for interest rates.  Make it a great day and a better weekend.

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