Happy Friday and congratulations if you waited to lock until today - it paid off. Yesterday was a great day for the mortgage bond market and interest rates as the FNMA benchmark bond closed up 67 basis points (an improvement of .125% to rates plus a little pricing enhancement) on the day. The impetus was the Fed's decision to keep rates where they are. With a 9-1 vote, the decision wasn't even close. While they did point out that some economic activity was expanding moderately, sighting household spending and fixed investments by businesses as well as the improved housing sector, they pointed to weakness in the global economy as the main reason for standing pat. Furthermore, net exports are soft - hampered by the global weakness - and the inflation rate isn't anywhere near the target of 2%. The next FOMC meeting is October 27 - 28.
This morning the FNMA benchmark bond is 29 basis points off its morning high of 104.31 at 104.02, up 7 basis points on the day. The GNMA (FHA and VA) is down 14 basis points. There is a lot of headwind around the current levels which is why we have seen the push-back - in addition to some profit taking. The new resistance levels are at 104.08 and 104.20 and the 200 day moving average is around 104.15 so it would take something big for the bond to break through those levels, especially after a big day yesterday which is bringing some profit-taking. The RSI (Relative Strength Indicator) is midway between oversold and overbought so it's a non-factor right now. The only data point for today came in on the soft side with August's Leading Economic Indicators at .1 vs. expectations of .2 - this hasn't been enough to elevate bonds to higher levels.
Should I lock or float? This is almost always a great question. With no more data being released today there's nothing to drive the market one way or the other except for the guesses of traders about what next week's data will bring. There's not a ton of data next week but there are a few things that could influence mortgage bonds one way or the other so I would probably lock today since there is strong resistance and take advantage of yesterday's and this morning's gains. If you do float, make sure you keep a close eye on the market so that you can act quickly should the market move against you.
Lots of great college football on Saturday and NFL on Sunday. Major league baseball is ramping up toward the playoffs and the NBA and NHL are getting ready for their seasons soon so all of the major sports are in play right now and it will only get better - assuming you like sports. I'm available to help with a pre-approval or anything else mortgage related - 702-812-1214 or 801-853-8720. Make it a great day and a better weekend.
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