Mortgage Bond Market Analysis - The Week Before Jobs Week

Happy Monday.  After spending lots of time in several different gyms watch my son play in two AAU basketball tournaments last week, it's back to a somewhat normal schedule.  The important things are the three things that could impact rates this week aside from any huge geo-political even like a major terrorist attack.  On a side note, it seems that the markets have been shrugging these off lately since they are becoming more normal, unfortunately.  It could be that investors would be selling bonds and pushing rates higher but are nervous about doing this because of the attacks.  At any rate, we have the Fed interest rate decision coming on Wednesday; no movement is expected but experts still believe that the Fed will raise rates at least once this year and some are thinking that September will be when it will begin.  While economic data stateside has been better for the most part, we are still seeing some weakness, especially in manufacturing.  We will get some more manufacturing data this week but the Fed will be watching the initial release of the 2nd quarter GDP which many expect to be over 2.5%.  A reading closer to 2% would leave traders with more questions about when the Fed will raise rates.  Secondary data points that will likely provide some insight as to what the primary data points might be are the Richmond Fed Manufacturing Index, the Chicago PMI, Consumer Confidence, Michigan's Consumer Sentiment, New Home Sales and Durable Goods numbers all come out this week.

The Bank of Japan will announce its interest rate decision on Thursday and it is widely expected that they will lower their rate.  That said, the markets have already been disappointed twice this month when neither the Bank of England or the European Central Bank reduced their rates.  Next week is Jobs Week when we get ADP Private Payrolls on Wednesday followed by Jobless Claims on Thursday and Non-farm Payrolls and the Unemployment Rate on Friday.  Last week the FNMA benchmark bond was down 9 basis points and has basically trended sideways for the last seven days although Friday and today have the bond down 18 basis points so it was up 9 basis points for the previous 5 days.  I think the tendency is for more selling and while I don't expect the Fed's policy statement to have much impact, I do think investors would be influenced to sell if the BOJ doesn't reduce their rates as expected.  The RSI remains oversold so we still have that going for us.  I think it's o.k. to float right now but do so with caution and make sure you have your phone handy and loaded with buyerZapp so that you can stay on top of the market (the link is in the upper right hand corner of my blog).  As always, feel free to call or email me if I can help in any way - 702-812-1214, 801-893-1737 or jed.wunderli@noblehomeloans.com.  Make it a great day and a better week.