It’s Fed Day

Mortgage bonds were able to close above their 25-day moving average yesterday, which is a strong technical sign for the near-term direction of mortgage interest rates. The hope is that today’s Federal Reserve announcement and press conference to follow will have a bearish tone, which would help support lower interest rates. Although the Fed is not going to change rates at this time, investors will be looking for any change to the current plan or for the Fed to announce more purchases of Year Treasury Notes or mortgage backed securities. Such a move would help lower interest rates in the future and could help the Fed stimulate the inflationary pressures they are hoping for.

The ADP Employment Report for the month of April was released this morning, and the number came in at a shocking 275,000 new hires. This was well above the 180,000 the market anticipated and could set the stage for a blockbuster report on Friday when the Bureau of Labor Statistics (BLS) is set to announce their estimate. Since the BLS report is far more significant to the markets, we need to be on-guard when that is released. A strong number could push bond prices lower and set the stage for higher rates.

We are going to suggest floating into the Fed announcement today. However, be prepared to lock if the statements are bullish.