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Tuesday, September 6, 2016

Mortgage Bond Market Analysis - More Data for the Fed to Chew On

Happy Tuesday-Monday.  I love long weekends and short weeks.  College football started this last weekend and that was great watching that and seeing some early upsets.  I was also doing my fair share of honey-dos so a productive weekend overall.

On Friday we had weaker data than expected yet the FNMA benchmark bond sold off a bit and closed down 8 basis points at 103.64.  This morning, with more weak data that gives the Fed even more reason to punt (football pun intended) at the September meeting, I would recommend continuing to float.  The ISM Non-manufacturing index came in at 51.4, still expansionary but 4.3 points below the estimates and also somewhat substantially lower than recent months' readings.  Couple this with a weak Non-farm Payrolls number on Friday and the contractionary ISM Manufacturing Index number of Thursday and the data is piling up in support of the Fed leaving rates where they are.

At 103.90, the benchmark bond is currently 11 basis points above the 2nd level of resistance.  The RSI is trending higher and is just a bit above the midpoint in between oversold and overbought so it is not yet a factor.  As for economic data / news that might have an impact on mortgage rates, tomorrow we get the Fed Beige Book at 2:00 pm EDT.  Thursday will bring us the ECB Policy Statement which will give us more insight into Europe's economy and Friday we get Wholesale Inventories.  As I mentioned above, I would float for now but the bond continues to trade in the relatively tight range that it's been in since July 29th.  It needs to break out one way or another and the more data we get that supports the Fed not doing anything in September, the more likely it is that it will break to the upside which means lower rates.  As always, if you are floating, keep a close eye on the market.  You can do that by reading this blog but you can get updates throughout the day by getting my app - buyerZapp - which will provide you with real-time news that impacts rates and gives you a rate-trend meter.  You can get the app by clicking on the link in the upper right-hand corner of the blog.

Make it a great day and a better week.

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