Greetings from Brasil as I am currently in Rio de Janeiro, certainly not a bad deal except for the fact it is somewhat difficult to conduct business from down here, especially with the internet being quite slow at times. Today’s radio show will be broadcast from here, so let’s hope the internet holds up while it is being recorded.
Last week went essentially as expected if you read last week’s report. We saw the corrective move, then the turn back higher, again reaching new heights in mortgage backed securities’ pricing. Of course, that translates to new record low mortgage rates. Rate alert services issued false alerts again last week as MBS prices did drop pretty good during the day, but if you followed my guidance, you knew better. The Treasury Auctions last week went fairly well, especially when you factor in the levels of buyside buying and higher amounts offered. But the big stories are that Retail Sales still isn’t doing very good and that inflationary concerns remain subdued. Of course, the Fed’s Policy Statement made some subtle changes as they left their rates unchanged. Without breaking it down in detail, the Policy Statement was favorable overall. Productivity dropped which could be interesting if it fails to recover, but it is not a major issue yet. The charts were skewed a bit with the monthly bond coupon rollover, but that also helped ensure a solid retracement.
This week will continue the data flow with some market moving data, especially Thursday with the Philadelphia Fed Survey, but there are not a lot of reports coming this week. We already have seen the data for today, which has been favorable overall, but here is this week’s currently scheduled events…
- Monday: Empire State Manufacturing Survey (8:30), Housing Market Index (10:00), 3-month T-Bill Auction (11:30), 6-month T-Bill Auction (11:30)
- Tuesday: E-Commerce Retail Sales (6:00), Housing Starts (8:30), Producer Price Index (8:30), Industrial Production (9:15), Narayana Kocherlakota Speaks (12:30)
- Wednesday: MBA Purchase Applications (7:00), Crude Inventories (10:30)
- Thursday: Jobless Claims (8:30), Leading Indicators (10:00), Philadelphia Fed Survey (10:00), Treasury Announcements (11:00), James Bullard Speaks (11:30), Charles Evans Speaks (1:00), Money Supply (4:30)
- Friday: No data or events scheduled at this time.
With the data calendar remaining light overall, with a few that could shake up the markets, technicals, news and stocks are going to be driving the markets for most of the week. Don’t expect much, if any, good news from the housing front and be alert Thursday as this will be the bigger data day.
Looking at the charts, we see the trend continues to push MBS prices to new heights and setting new record low mortgage rates. MBS prices did dip below their 10-day moving average briefly, but that was due to the monthly bond coupon rollover, so once again we see the trend did not falter, and will not so long as MBS prices maintain levels above their 10-day moving average as I have been saying for a while now. Stochastic indications are now just below the overbought spectrum and looking positive as well. MBS prices today have pushed through two resistance layers and essentially have tested the lower one for support, which held. Keep in mind that the trend has been “baby stepping” its way higher, and retracements are taking place with just about every significant move higher.
The bottom line for this week continues to be the same as the last several weeks. The trend remains intact and unless MBS prices drop and stay below their 10-day moving average, there is no need to rush to lock. Don’t forget to follow my daily guidance at Florida Mortgage Daily for any changes.
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