Thursday, May 5, 2011

Bullish on Bonds

Good Morning and Happy Thursday to all the "Insighters"...

It appears the calls for this week were spot on but 1 day late in arrival. We closed yesterday over a critical ceiling and the FNMA 4.5 coupon broke through 103 closing at 103.063. As I called for breaking through that would likely lead to a nice rally and we opened this morning with a +21 gap up! The driving factors behind this are...
  • Initial Claims: Actual 474K, prior 429K (the consensus number was expected to drop almost 30k not go up almost 50k)

  • Continuing Claims: Actual 3733K, prior 3641K (actual also higher than consensus)

  • Unit Labor Costs: Actual 1.0%, prior -0.6% (revised -1.0%)

The market is poised for a nice run up now for the next several weeks and I believe we will see the 103.5 broken through in the next week+ and could potentially see 104 (FNMA 4.5 Coupon) before the end of this month, barring any unexpected news release. The 10y is now at its lowest level of 2011 and yields are +8/32 putting it at 3.18%.

I see today's trading range to likely be at its gap up open since we are in territory not seen in months. 103.00 - 103.3 is the range I expect today and will likely close in the 103.1-103.2 section of this.

Lock Advice.
If closing in the next 7-10 days - LOCK (pricing is excellent and there is not enough upside in this short term window to take the risk)
If closing in the next 14+ - FLOAT (I believe we can see another .25 -.5 in pricing gains during the next 2 weeks and this will give your bwrs lowers rates)

Make it a great day and remember... THIS IS THE MOST AFFORDABLE TIME IN 40yrs TO BE BUYING A HOME!! Get your buyers off the fence!

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