It’s a quiet news day today, so markets will trade heavily based on the technical picture. Although it is another Fed day today, they will not be raising interest rates at this time. History shows that they tend to only make rate adjustments on months where a press conference is scheduled for after the announcement. Since this meeting does not have a press conference, we can assume they will wait at least until the next meeting in June after which a press conference will follow before making their next hike. However, we need to listen for their statement release after the announcement for any indication as to when they intend to stop reinvesting in mortgage backed securities. This will eventually happen and when it does, mortgage rates will move a bit higher.
Tomorrow will be the ADP Employment Report, where the market is expecting about 170,000 new hires to be reported for the month of April. Although the more important measure comes from Friday’s Bureau of Labor Statistics (BLS) report, the ADP report will help foreshadow what we can expect to see from the BLS. Recent reports have shown a greater discrepancy between the two agencies. However, over time they tend to balance out for the most part. Since ADP has been reporting higher numbers than the BLS, we could see ADP be more conservative in their April reporting than the BLS. We will have to wait and see.
Mortgage bonds are trading in a wide range. With support not too far below current levels, we will hopefully not see much of a drop today. Given the risks associated with employment reports, the safe play will be to maintain our locking bias.