Mortgage Bond Market Analysis - Fed Decision Day

It's Hump Day but more importantly (at least for those getting mortgages), it's Fed Decision Day.  At 2:00 Eastern time, the Fed will announce whether they are going to leave the Fed Funds rate where it is or raise it.  Most of the voting members of the board are doves and if you add to that the recent weak data, I think it's unlikely that they will raise the rate; six weeks ago the vote was 9-1 in favor of leaving rates where they were.  While there is no data being released today, there is a 2 and a 5 year bond auction and depending on how they are received, we could see some movement one way or the other in the FNMA benchmark bond - the last two auctions were received well and we got some price improvement because of them.

Yesterday I wrote that even though the bond was up about 20 basis points when I finished my post, I didn't think we'd really break through the resistance levels and establish a new range.  The FNMA bond closed the day up 11 basis points at 104.61, 9 off of where it was when I finished my post and 5 basis points above the first resistance level (two below the 2nd).  We remain in a very tight trading range; looking back to October 2nd (over three and a half weeks ago) we are 19 basis points above the opening of 104.42.  Today's auctions and the Fed decision could give the market the impetus it needs to break out of the range.  Locking now wouldn't be a bad thing since rates really are great, however, I would consider taking a gamble and floating through the decision since I expect the Fed will keep rates where they are AND that the auctions will be well received like the previous two.  If you do float, be extra vigilant since bond prices can move in a hurry against you if bad things happen.
Tomorrow brings weekly jobless claims along with a 7-year treasury auction.  On Friday we get Personal Income, Personal Spending (and related items), Chicago Purchasing Managers' Index and Michigan's Consumer Sentiment Index.  I may not be available tomorrow to write about today or tomorrow morning's data but I can be reached by phone if you need to get a hold of me for mortgage information (or a pre-approval) - 702-812-1214 or 801-853-8720.  I plan to be back on Friday if I miss tomorrow.  Make today great.