Mortgage backs have slipped into the red. As I mentioned last week, the next few days could be high volatility, market moving affairs with the mid-term elections, FOMC meeting, and a boat load economic data culminating with the Employment Report on Friday.
Overall, we see the fixed income market as “soft” but not in a hurry to head towards higher Austin mortgage rates. Just like I mentioned earlier today, the trade is one of consolidation and near good support.
We look to still be headed for better Austin mortgage rates. With the bounce back today, these are very nice levels.
Looking at last week’s rally, most of the trade was on short covering which means that traders were not initiating new long positions (expecting the market to continue to rally). We buy that argument and if correct, we would suggest that you “buy the rumor, sell the news”. In English, this means that mortgage pricing should remain relatively stable for most of the week and then worsen post Unemployment Report data on Friday
As predicted, Friday’s bearish close, along with this week’s record 137 billion in treasury auction supply has kept the market under pressure as we begin a new week. 7 billion in 5 year tips will greet the screen today, followed by 44 billion of 2 year notes on Tuesday, 41 billion of 5 year notes on Wednesday, and 31 billion of 7 year notes on Thursday. This could give the market a bit of indigestion. Traders talk about “no shows at the lows”, meaning that buyers will not show up even at cheaper levels. We believe that a strong overseas bid will continue and with most of paper being shorter in duration, the auctions “should” be much ado about nothing.
Strange start to the week as stocks opened on the [...]
