Did everyone enjoy the ride last week? It was definitely another up and down week, bringing plenty of action, but in the end, bonds were basically unchanged for the week.
Retail Sales beat expectations, sending bonds crashing down as expected, but a relatively tame read on inflation from the CPI data got them back on their feet. A very interesting pattern may be developing if you look closely, one that could send rates lower. Take a look…
As you can see, bonds have tested their support just above the rising 200-day moving average. They have done so three times over the last few weeks, keeping bonds in a sideways pattern, with even a slight increase in the tops, sending potentially bullish pattern for bonds. You can see the mixed signals sending bonds lower, but then giving them strength again, the only question remaining being whether they can break the sideways pattern.
So, will this week hold the key? Let’s take a look at what is in store, as many surprises may lay in the shadows…
- Monday: Index of Leading Economic Indicators (LEI) (10:00)
- Tuesday: Producer Price Index (PPI) (8:30)
- Wednesday: Crude Inventories (10:30), FOMC Minutes (2:15)
- Thursday: Initial Jobless Claims (8:30)
- Friday: Existing Home Sales (10:00)
Wednesday is the main event and the only real big data, but that doesn’t mean other news and events aren’t going to be a factor. Technically speaking, bonds look fairly good, as the pattern suggests. And with the likelihood that the Fed will stop cutting rates, bonds are looking very good right now. Inflation fears are backing down and, unless the PPI shows otherwise, bonds should see a favorable week ahead.
I am going to suggest floating so long as bonds hold above their moving averages.
I am reading mortgage blogs to try to learn a little more about the industry and I was wondering what you mean when you suggest “Floating”
Great insight Robert the fed seems to be taking a pause and waiting to see how rate cuts are going to filter throught the system. Also, how do you feel about several fed officials talking about raising rates sooner rather than later?
Not much going on this week. Maybe Congress might provoke some movement – Foreclosure bill, or hearings on commodity investment limits, but other than that, pretty slow week. Doesn’t look like Fed is going to drop any news about interst rates for now.
Sorry it took so long to get back to you guys, but I have been flying a lot this month and my laptop is acting up.
Greg – Floating is the term used when you decide not to “lock” your rate. Locking, in case you are unfamiliar, is when you tell your mortgage professional to lock in, or secure, your rate at the current pricing levels. It is recommended to float when conditions forecast a likelihood that rates (or at least pricing) will improve.
Cliff – The Fed is overdue for a pause, and yes, I favor an increase in their rates to dampen inflation. PPI shows inflation, though appearing tame, is not under control.
Ling – The Fed news is in the minutes, the unedited version of what when through the voting member’s decisions, which did as expected, signified that the rate cut cycle is over, though no real indication of rate increases in the mix.
Thanks