I hope everyone had a wonderful holiday weekend and one thing was for sure, there were no fireworks in the mortgage backed securities market. In fact, it was a rather lackluster weekend with no real “new” direction and certainly no typical volatility. That does mean that mortgage bonds held above their 200-day moving average and that is a positive sign of things to come.
It was somewhat surprising that with the amount of data that was coming in last week, MBS pricing essentially went nowhere. The main reason mortgage backed securities likely held on was based on the reduced amount of Treasuries set to come into the marketplace. The overall economy is still shrinking and inflation remains “in check” as presented, so there was no need for panic in the markets, but apparently no need for a rally either. The bottom line is that it appears that most traders were on vacation throughout the week.
What lies ahead remains to develop in certainty. Mortgage backed securities are holding in a trading range between their 200-day moving average (support) and their 50-day moving average (resistance). As we move forward, the two levels will converge and we will get a breakout in one direction or the other, and that is when certainty will be shown.
Will that breakout happen this week, or next, or even beyond that? There is some data that will try to come to the aide of mortgage bonds, so let’s look at this week’s current lineup…
Monday: ISM Services Index (10:00), 3-month T-Bill Auction (11:30), 6-month T-Bill Auction (11:30), 10-year TIPS Auction (1:00)
Thursday: Elizabeth Duke Speech (8:00), Jobless Claims (8:30), Wholesale Trade (10:00), Treasury Announcements (11:00), 30-year T-Bond (1:00), Money Supply (4:30)
Friday: International Trade (8:30), Consumer Sentiment (9:55), Tim Geithner Speech (10:00)
The beginning of the week does not have much activity, but the week will end with some notable events that could shape the future of mortgage rates. Hopefully by the end of the week we will see exactly where mortgage rates will be headed.
A quick look at the charts reveals mortgage bonds within a narrowing trading range with stochastic indications in the overbought spectrum and becoming negative, meaning a correction is likely coming. Will that correction break below the 200-day moving average? I rather doubt it at this point, but it could. Right now, I expect mortgage rates to remain in their trading range at least until Friday, then possibly break out higher (pointing to lower mortgage rates) after Consumer Sentiment is released as I am guessing this report will be favorable for MBS pricing.
Mortgage Market Update
by Robert D. Ashby on 06. Jul, 2009 in Mortgage Rates
I hope everyone had a wonderful holiday weekend and one thing was for sure, there were no fireworks in the mortgage backed securities market. In fact, it was a rather lackluster weekend with no real “new” direction and certainly no typical volatility. That does mean that mortgage bonds held above their 200-day moving average and that is a positive sign of things to come.
It was somewhat surprising that with the amount of data that was coming in last week, MBS pricing essentially went nowhere. The main reason mortgage backed securities likely held on was based on the reduced amount of Treasuries set to come into the marketplace. The overall economy is still shrinking and inflation remains “in check” as presented, so there was no need for panic in the markets, but apparently no need for a rally either. The bottom line is that it appears that most traders were on vacation throughout the week.
What lies ahead remains to develop in certainty. Mortgage backed securities are holding in a trading range between their 200-day moving average (support) and their 50-day moving average (resistance). As we move forward, the two levels will converge and we will get a breakout in one direction or the other, and that is when certainty will be shown.
Will that breakout happen this week, or next, or even beyond that? There is some data that will try to come to the aide of mortgage bonds, so let’s look at this week’s current lineup…
The beginning of the week does not have much activity, but the week will end with some notable events that could shape the future of mortgage rates. Hopefully by the end of the week we will see exactly where mortgage rates will be headed.
A quick look at the charts reveals mortgage bonds within a narrowing trading range with stochastic indications in the overbought spectrum and becoming negative, meaning a correction is likely coming. Will that correction break below the 200-day moving average? I rather doubt it at this point, but it could. Right now, I expect mortgage rates to remain in their trading range at least until Friday, then possibly break out higher (pointing to lower mortgage rates) after Consumer Sentiment is released as I am guessing this report will be favorable for MBS pricing.
Tags: MBS Commentary