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Thursday, September 8, 2016

Mortgage Bond Market Analysis - Jobless Claims Thursday

Happy Thursday.  Both Initial and Continuing Jobless Claims came in better than expected.  Initial Claims came in at 259K beating estimates of 265K and previous of 263K.  Continuing Claims were 2,144K vs. estimates of 2,153K and previous of 2,151K.  The JOLTS report from yesterday was much better than expected, coming in at 5,871 vs. estimates of 5,643.  Both of these jobs reports are in contrast to the weak jobs data from last week.  Nevertheless, traders decided to sell the FNMA benchmark bond yesterday as it closed down 3 basis points after closing up 41 basis points on Tuesday.  Today the benchmark bond is down again, off 14 basis points at this point in time.

The RSI is just above the mid-point between oversold and overbought and is just a bit closer to the overbought threshold.  We are 13 days away from getting the Fed interest rate decision and with yesterday and today's data, I think traders are a bit more uncertain about what the Fed will do.  I personally don't think an increase is justified based on the recent data we have seen, but there may be enough Fed members who are chomping at the bit to raise the Fed Funds Rate that it gets done in spite of the data.  Of course, we still have a few more data points between now and then but for now, would recommend locking.  I think we are going to stay in the narrow range we have been in and if the Fed decides not to raise the rate, there's a good chance we will see a breakout to the upside with the mortgage bonds and this would be good for mortgage rates.  If the Fed decides to raise the rates, traders will likely decide to sell off, in the short-term anyway, which will be bad for rates.

Make it a great day.

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