Mortgage Market 10/13/11
Well after a heated and furious sell off the bonds look to be retracing some of the previous losses. Today brought us a positive open for the first time in over a week.
The 10Y is currently +6/32 and its yields have dropped from 2.22% down to 2.18% where it currently sits.
The FNMA 3.5 coupon is following suit and opened with a +15bps and is currently sitting at 101.031. Yesterdays close settled at 100.875 and as bad as that sounds over recent weeks keep in mind almost 37bps of the -52bps loss yesterday was due to it being bond rollover day for the next month. While rollover affects charts it does not affect price. Upon initial look I had forgotten yesterday was bond rollover and thought it was just further carnage to the beating the bonds had already taken. Only after seeing that pricing was not quite as bad as I expected did it dawn on me something was off and saw it was rollover day.
Here is the news driving today's market...
- Initial Claims: Actual 404K, prior 401K (consensus 406K)
- Continuing Claims: Actual 3670K, prior 3700K (consensus 3700K)
- Trade Balance: Actual -$45.6B, prior -$44.8B (consensus -$46.1Brevised)
- Treasury Budget (14): Briefing -$64.0B, prior -$374.6B (consensus -$67.0B)
Initial claims still above 400k is not good and even though almost flat still slightly worse than previous month
Continuing claims is down, nice, but dont get too excited some of this is the result of people losing their benefits its not all job creation believe me!
Trade balance basically flat but again slightly worse than previous
When you factor in bond rollover its truly showing the bonds are finding support at the 101.5 mark on the FNMA 3.5 coupon. This is good and we need to hold here or we could see another 100bps of sell off. Closing above 101.5 today (101.25 considering bond rollover) should be supported with the release of this data and getting close to 101.5 (close to 102 could be in the cards.
As I say constantly this is a volatile market and when pricing is this good and you are saving money dont look a gift horse in the mouth. Take your savings, enjoy the rate and dont get hung up on minor shifts. I watched a few client not lock when I suggested and they are now feeling the pain of that decision.
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