A little reprieve, but maintaining a locking bias

After suffering moderate losses yesterday, mortgage bonds are higher today.  mortgage bonds broke below both the 100 and 50 day moving averages yesterday, but came back strong this morning, pushing back through both ceilings.  However, the strength in the bond market seems to be losing its power, as prices are well off of their high points for the day.  The 10 Year Note yield has dropped and is now down to 2.8%.  It seems this may have a bit more room to fall before making its way back up towards 3% as we anticipate will happen in the near to mid-term.

Initial Jobless Claims were reported this morning at 326,000 for last week, which is an increase of only 1,000 from last week’s levels.  This number has been trending lower lately, and seems to be settling in at the 320,000 range.  PMI Manufacturing Index was reported to be at 53.7, which is lower than the 55 number expected.   Also, the Federal Housing Finance Agency (FHFA) released their House Price Index for November, showing a disappointing price increase of only .1% for the month of November.  This is a big miss from the .4% increase expected, and further evidence that our once hot housing market has slowed.  However, a gain is certainly welcome after the significant losses our housing market incurred the past five years.

With mortgage bonds seeming to stall, we are going to continue with a locking bias.  If bonds can make a clear break above the 100 DMA, we will switch to a floating stance.  However, it seems unlikely that bonds will improve much beyond the current levels.