We have another very big week for economic data. We will get a double dose of Factory Orders this morning with both the August and September release. But the two biggest reports this week will be GDP and Non-Farm Payrolls. Third Quarter GDP will be released on Thursday. The market is expecting growth around 2.0% which is slower than the prior reading of 2.5%. If we get a number below 2.0%, MBS will rally. If we get a reading above 2.15% then MBS will sell off. Non-Farm Payrolls will be released on Friday. The market is expecting a very low reading of 130K which is a pull back from the prior reading of 148K. If you recall that 148K was a big miss from the consensus estimates of 180K at that time. This reading has the potential to set our next trading channel. If we get a reading of 125K or below, expect MBS to rally and crawl back up to the trading channel that we had two weeks ago (better pricing for you). But, if we get a reading above 145K, then MBS will sell off and we will break through our 25 day moving average and trade in a new and lower channel (worse pricing for you). There are no major Treasury auctions today. We do have a limited upside (+25BPS) from our current position and a limited downside too (-26BPS) from our current position. So, we have a wider range this week compared to last week and may see some more defined pricing swings as a result. Ultimately it will depend on GDP and Non-Farm Payrolls, if we are going to see any type of meaningful rally INFO THAT HITS US WHERE WE LIVE... This week well have to be the candle that spreads light on the housing recovery, as the September Pending Home Sales Index didnt shine too brightly. This measure of contracts signed on existing homes fell 5.6% from August to September, suggesting a dip in closings for that type of property during Q4. The September drop was put to a lower level of consumer confidence, plus higher mortgage rates and home prices, although home price gains also reassure buyers that theyre making an appreciating investment. But please note. Those slightly higher mortgage rates were still near historical lows and have since receded. In addition, 2013 should be a solid year for home sales overall, with the National Association of Realtors (NAR) predicting total existing home sales 10% higher than in 2012. The NAR also expects this years 11% to 11.5% price gain to be followed by a 5% to 6% increase for 2014. The S&P/Cash Shiller 20-City Composite index of home prices showed a 12.8% annual gain in August, its biggest since February 2006.
Posted on: Mon, 04 Nov 2013 20:03:54 +0000
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