Weds Afternoon Technicals: Wednesday - April 9, 2014 Current Trend Direction: Sideways to slightly lower longer-term Advise Your Clients: Floating, supported by a triple layer of support Current Price of FNMA 4.0% Bond: $104.12, -9bp Note: The Monthly Bond Rollover occurred after the close of trading yesterday with the effect being -38p for the 4% coupon. Every month the coupon rolls over. In this case, this months coupon is closed out and all new loans are placed into next months coupon. There is no effect on rate sheets or pricing. Think of it as the time they mature. The recently closed issue, loans that are satisfied 30 years from now, are packaged and sold. Because the seller or wholesale lender now has an additional 30-days, it is like having a 30-day extension on their rate lock. Light selling is pushing Mortgage Bonds into negative territory so far this morning. Corporate earnings season kicked off yesterday with Alcoa reported a profit decline due to a drop in aluminum prices. It is worth noting that earnings did beat expectations. Investors will be looking for the impact of the harsh winter weather for 1st quarter earnings, with signs of optimism for the 2nd quarter. And with the Fed’s stimulus ongoing, any dip in prices is looked at as a buying opportunity. The Mortgage Bankers Association (MBA) reports that its Market Composite Index, a measure of total loan application volume, fell by 1.6% in the latest week for its 4th straight weekly decline. The refinance index fell 5% and is at its lowest level since the end of 2013. In addition, the refinance share of of mortgage activity fell to 51% of total applications to its lowest level since July 2009. The purchase index rose by 2.7% as the spring buying season gets underway. Later today at 1pm ET, the Treasury will sell $21B 10-Year Notes and comes after yesterdays solid performance by the 3-Year offering. Also garnering attention this afternoon is the 2pm ET release of the March 19 Fed Minutes. There may not be any surprises within the Minutes – but we may see some market volatility in response to continued tapering…so stay tuned. Technically, the 4% coupon is resting on support at the 25 and 100-day Moving Averages with the 200-day below those levels. We continue to float, but be on guard with headline risk coming this afternoon
Posted on: Wed, 09 Apr 2014 22:20:40 +0000
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