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Monday, April 18, 2016

Mortgage Bond Market Analysis - Oil and Data

Happy Monday morning.  Over the last seven days the FNMA benchmark bond has traded in a VERY tight range.  Traders are waiting for some event or news to give them reason to buy or sell.  Over the weekend, the energy czars of the major oil producing countries met and didn't come to an agreement to freeze production thanks to Saudi Arabia and Iran being at odds with each other.  While this may have given reason for traders to buy bonds since the price of oil dropped, it didn't drop as much as it could have because Kuwait is accidentally putting a freeze on oil since their oil workers are on strike.  This is probably only a short-term thing and oil could drop further in the near future if the strike gets worked out.

The only data point this morning is the NAHB Housing Market Index which came in at 58, lower than the expected 59 but still a solid number.  The benchmark bond is currently up 1 basis point at 102.59.  There are a few data points out this week and none of them should impact rates all that much.  The big things to watch are oil and the Kuwait strike as well as earnings season which gets into full gear this week.  Strong earnings, especially if expectations are for better earnings / revenue next quarter, could get investors moving money from bonds to stocks which would push rates higher.  Of course, the opposite is true as well, if earnings or prospects for improvement next quarter don't entice investors to put more money into stocks, bonds could see some gains.  I would lock since we are at the top end of our pricing relative to the last several months and rates are absolutely fantastic.  Take advantage of them and don't be greedy.

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