Mortgage Market Guide - (From www.shouldirefi.com)
Current Trend Direction: Lower
Risks favor:
Locking Bias
Current Price of FNMA 4.0% Bond:
$101.25, -19bp
Mortgage Bonds are starting the day to the downside this morning, following through on
yesterdays sell off. A better than expected Jobless Claims number along with
comments from the Wall Street Journal, stating that "fears of a double dip recession are
exaggerated", are helping Stocks and hurting Bonds so far today.
While the biggest headline of the day could be Lebron James's announcement at 9pm
ET tonight, this morning it was Initial Jobless Claims which grabbed the headlines.
People filing for first time Claims on unemployment benefits came in at 454K. This was
better than market expectations of 465K and showed improvement from last week's
472K. While the number is still high, it gave the financial markets a glimmer of hope
and an excuse for Bond investors to take a little profit. As we have been saying, Bonds
have been priced for perfection and any misstep in economic data is providing reason to
preserve profit.
There are 10M people still collecting unemployment benefits - 4.4M in Continuing
Claims and 4.6M collecting Emergency Unemployment Compensation. About 350,000
people saw their unemployment benefits expire in the last week, after Congress went
into recess without passing any extension to the benefits. If these individuals become
reengaged in job seeking, it will grow the labor force and the ranks of the unemployed
that are counted in the headline Unemployment Rate. These factors will likely push the
Unemployment Rate higher than the current 9.5% in the coming months.
The Technical picture for Bonds isn't looking very pretty. As reported in yesterday's
market news section within the Bond page, the closing signal established yesterday was
a Bearish "Dark Cloud Cover" Pattern. This typically portends a negative reversal and
more downside movement in prices. Combine this with a Negative Stochastic
Crossover from overbought levels, and we have the likelihood of seeing lower prices
ahead. The closest support level was tested this morning at 101.125. If this level is
broken, the next clear floor of support lies at the 25 day MA, currently at 100.49. And
later this morning the Treasury Department will announce the size of next week's 3, 10,
and 30 year auctions. This news, along with the action in Stocks could be a market
mover.
We will start the day with a bias towards Locking.
Locking Bias
Current Price of FNMA 4.0% Bond:
$101.25, -19bp
Mortgage Bonds are starting the day to the downside this morning, following through on
yesterdays sell off. A better than expected Jobless Claims number along with
comments from the Wall Street Journal, stating that "fears of a double dip recession are
exaggerated", are helping Stocks and hurting Bonds so far today.
While the biggest headline of the day could be Lebron James's announcement at 9pm
ET tonight, this morning it was Initial Jobless Claims which grabbed the headlines.
People filing for first time Claims on unemployment benefits came in at 454K. This was
better than market expectations of 465K and showed improvement from last week's
472K. While the number is still high, it gave the financial markets a glimmer of hope
and an excuse for Bond investors to take a little profit. As we have been saying, Bonds
have been priced for perfection and any misstep in economic data is providing reason to
preserve profit.
There are 10M people still collecting unemployment benefits - 4.4M in Continuing
Claims and 4.6M collecting Emergency Unemployment Compensation. About 350,000
people saw their unemployment benefits expire in the last week, after Congress went
into recess without passing any extension to the benefits. If these individuals become
reengaged in job seeking, it will grow the labor force and the ranks of the unemployed
that are counted in the headline Unemployment Rate. These factors will likely push the
Unemployment Rate higher than the current 9.5% in the coming months.
The Technical picture for Bonds isn't looking very pretty. As reported in yesterday's
market news section within the Bond page, the closing signal established yesterday was
a Bearish "Dark Cloud Cover" Pattern. This typically portends a negative reversal and
more downside movement in prices. Combine this with a Negative Stochastic
Crossover from overbought levels, and we have the likelihood of seeing lower prices
ahead. The closest support level was tested this morning at 101.125. If this level is
broken, the next clear floor of support lies at the 25 day MA, currently at 100.49. And
later this morning the Treasury Department will announce the size of next week's 3, 10,
and 30 year auctions. This news, along with the action in Stocks could be a market
mover.
We will start the day with a bias towards Locking.