Mortgage Bond Market Analysis - Beat-down Edition

It's forgotten Thursday - day after "Hump" day and day before TGIF.  So far this day is forgettable relative to the performance of the benchmark bond.  Initial jobless claims came in a tad lower than expected at 289K vs. 295 expected.  This good news follows yesterday's beat-down which was, in part, spurred by the recovery of the Russian Rubel.  Yesterday also got a lift from the Fed when Yellen basically said that while they won't raise the Fed Funds rate for  a little while, it is on the horizon as economic statistics are all starting to look better.

After Yellen's comments in the afternoon we saw a lot of volatility.  There were three 20+ point swings with one of 31 basis points (up) and the next of 35 basis points (down).  Obviously there is dissent or confusion in the market as to the true strength of the recovery as well as the timing of the rate increases.  The FNMA benchmark bond closed down 27 basis points yesterday and with the good news regarding the jobless claims, sellers are winning the day so far with the benchmark bond currently down 27 basis points at 103.87 which is 1 basis point below the 1st level of resistance.  Here's the chart:

I'm not one to say I told you so (o.k., sometimes I am) but I do always say that for news / data releases like FOMC speeches and jobs data (jobless claims are every week on Thursday morning at 5:30 a.m. Pacific time), it's usually a good bet to lock ahead of these things to be safe.  Between the losses from yesterday and this morning, we are looking at an increase in rate of .125% or an increase in fee of about .5 points.  In the case of locking loans, I think it's better to be safe than sorry, especially if you have the option of floating down if rates get significantly better.

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