Mortgage Bond Market Analysis - Weak Data Provides Strength for Mortgage Bonds

With October drawing to a close and the holiday (Christmas) buying season right around the corner, durable goods orders came in at a disappointing -1.2% vs. expectations for a disappointing -1.1%.  Ex-transportation, they missed the mark even more, coming in at -.4% vs. expectations of 0%.  This is a positive for mortgage bonds and is currently providing a lift as the FNMA benchmark bond is up 15 basis points at 104.65 - 2 basis points above the 2nd level of resistance.  The Case-Schiller Home Price Index came in as expected at 5.1% and is a non-factor in pricing, partly because it's based on older data.  Another bit of good news for mortgage bonds came in the form of the final October Consumer Confidence reading which came in at 97.6 vs. estimates of 102.5 and a preliminary reading of 103.00.  This is a major revision to the down side and should help push mortgage bond prices even higher.

Here's a look at the chart from about a half hour ago:

The benchmark bond is currently up 19 basis points at 104.69 - 6 basis points above the 2nd resistance level.  The RSI is slightly above the mid-point between overbought and oversold so this isn't a major factor right now.  By itself, I'm not sure that today's data is enough to break us out of the current trading range but there is some other announcements throughout this week that may lend a hand.  Tomorrow we get the Fed's interest rate decision.  I don't see them raising rates but anything can happen.  At the last FOMC meeting the vote was 9-1 in favor of keeping rates where they are and with weak data, I don't see enough voting members changing their votes in favor of an increase.  Add to our weak data the fact that the ECB, PBOC and BOJ are all doing things to try to stimulate their economies and you have no real reason for the Fed to raise the Fed Funds rate.

On Thursday we get the jobless claims numbers, just like every Thursday and on Friday we get personal spending numbers, Chicago Purchasing Manager's Index and the Michigan Consumer Sentiment Index.  By the end of the weak we will find out if we can break out of the trading range one way or the other or if we will continue to be stuck here.  I will note that being "stuck" here isn't a bad thing since rates are very low which makes it a great time to buy a home or refinance an existing mortgage.  I'm always available to assist you or someone you know with a mortgage.  Please contact me at 801-853-8720 or 702-812-1214.  A final look at the benchmark bond shows it's given up some of its gains as it's only up 10 basis points at 104.60.  Make today great.