Weekly Market Update - Tuesday May 31st 2016

Tuesday, May 31, 2016

What's going on and why does it matter?
Mortgage bonds opened lower today, and are sitting right at their 100-day moving average, which has been operating as a strong level of technical support over the past few weeks.  This is a big week for the markets with lots of high-tiered economic reports that may sway the market wildly one way or another.  Of particular interest is Friday's non-farm payrolls report, preceded on Thursday by an OPEC meeting on oil, and an ECB meeting on European monetary policy.  If the economic reports are favorable this week, the Fed may be more inclined to increase rates in June.  If this happens, the Fed may bring an end to their mortgage bond buying program sooner rather than later.  The Fed is scheduled to purchase up to $1.4 billion in GNMA mortgage bonds today, and they'll be purchasing up to $2.375 billion in 30-yr conventional mortgage bonds tomorrow.  Today's personal income and core inflation numbers came out in line with market expectations.  H owever, expect lots of volatility this week as the market deals with the deluge of economic reports that will be released in the coming days.  In the midst of all this, it'll be interesting to see if mortgage bond prices can hold above their 100-day moving average.  If they break below that level, the next hard stop on the way down will be their 200-day moving average, which is quite a ways down.  We haven't seen bond prices decline to that level since the beginning of the year.

What should you do about it?
Watch to see if mortgage bond prices can hold above their 100-day moving average.  However, be prepared to lock quickly if bonds break below that level.



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Economic reports that may impact mortgage rates this week: