Bonds Headed Lower, Interest Rates Higher
Bonds broke below support today and the technical readings are negative. Bonds started their loosing streak on Wednesday during what was an already volatile week. A better than expected reading on the labor markets fueled a rally in stocks, hence investors moved out of bonds and into stocks. The benchmark 3.50% coupon ended the week 46bp lower at $100.16 resulting in mortgage rates .25% higher than earlier in the week.
Bonds will likely move down to their 50-Day Moving Average from here, which is 38bp beneath present levels which should result in mortgage rates moving higher by .25% to .375%.
Interview with Bloomberg’s Kathleen Hays
Click below for this week’s interview and find out more about the direction of the credit markets.Click here for interview
Positive News For The Housing Market
On Tuesday the Case Shiller Home Price Index gave a positive read on the housing market with a 1.0% rise in June for 20 major cities and a 4.2% rise over the past year. These numbers were influenced in part by the home buyer tax credit.
Unemployment Rate at 9.6% Friday’s Jobs Report had an upside surprise, showing 54,000 jobs lost in August, better than estimates of 120,000 jobs lost. Note that the big part of the decline was due to the elimination of census worker j obs. Private sector jobs also surprised to the upside with 67,000 job creations, much better than the 44,000 originally forecast. The unemployment rate did tick up to 9.6%, in line with expectations. Revisions for the past two months were at 123,000.
We maintain our bias toward locking into mortgage rates.
Fannie Mae 3.50%- $100.16 -46BP