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Monday, September 26, 2016

Mortgage Bond Market Analysis - Money Monday

Happy Monday.  My Utes had a great come-from-behind victory on Friday to beat USC with three great touchdown drives in a row to end the game and win 31-27.  They are looking sharp on offense but a few injuries are keeping them from playing their best on defense.  Hopefully we can play good enough to win the south division of the PAC-12 this year.  Cal is next on Saturday at Berkeley.

As for the mortgage bond market, last Wednesday I recommended floating and we've been getting some follow-through from the Fed interest rate decision where they left it unchanged.  Since then, traders have continued to buy the FNMA benchmark bond and rates have improved.  It was just a slight up day on Friday with the bond closing up 3 basis points at 103.89.    This morning New Home Sales came in a bit better than expected at 609 vs. 600 but below last month's reading of 659.  In spite of the decent data, traders continue to buy the bond as it is up 20 basis points to 104.09 - this is 28 basis points above the 2nd level of resistance of 103.81.  The five-day buying spree has pushed the RSI quite a bit beyond the overbought level.

There are a few key data points this week in addition to a number of talking heads from the Fed including an address from Fed Chair Janet Yellen on Thursday at 5:00 EDT.  OPEC is meeting once again to talk about limiting production to get oil prices higher - even if they agree to do it there's no guarantee that the countries will follow the agreement.  Oil is up in anticipation of the meeting.  Today's chart of the benchmark bond looks like it might continue to push a bit higher throughout the day.  My thoughts are that I'm not confident that the data will be all that great so traders might continue to buy throughout the week.  That said, there could be some profit taking with the recent run and considering the fact that the RSI is overbought.  The talking heads from the Feds will likely have a bit of an influence as well - especially if their message is different from what's expected.  My recommendation is to lock if you or a client has a loan that is closing within 15 days; take advantage of this most recent run.  If you have a longer time frame than that, you could float but do so with extreme caution and keep a close eye on the market so that if the market turns against you, you can react quickly to lock ahead of a potential price change.

I'm always happy to help in any way I can be it a pre-approval or a question about rates or mortgage guidelines.  Feel free to contact me at 801-893-1737 or 702-812-1214.  Make it a great day and a better week.

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