23 Apr Not the time to take a risk floating
The losses suffered in yesterday’s bond market trading were significant enough to take bonds out of the sideways channel they were in for the past 16 trading
days. This pushed the best executed no cost interest rate 1/8% higher and established the beginning of what appears to be a downward channel.
If this channel takes hold and continues, bonds may have a difficult time finding support at the 50 and 100 day moving averages which are approximately
20 basis points beneath current levels. A break beneath these levels will be very negative for the near term direction of mortgage interest rates
and could help fuel the stock market which is again near all-time high levels.
Initial Jobless Claims for the week ending 4/18/2015 were reported to be 295k. This was worse than expectations of 286k and represents an increase
of 1k from last week’s figure, which was left unchanged. This week’s report will be used as the sample week for both ADP and the Bureau of Labor
Statistics when they both estimate job growth for the month of April. With the report not showing the improvement the market hoped for, this
will not help support a super strong month of new job creations. However, with the month of March’s report showing such dismal results, we would
expect to see a stronger report as we head into the summer months when many employers add seasonal workers. We will have to wait until next Wednesday
and Friday to see how the reports turn out.
With mortgage bonds remaining weak, we will maintain our locking bias until we can see that bonds have the strength to maintain their position. We
projected a significant move in the near term for the past two weeks. Based on the market’s performance the past few trading days, now is not
the time to take chances in hopes of improvement.