Wednesday, February 26, 2014 - Article by: Joe Shamie - First Choice Loan Services -
Wednesday - February 26, 2014, 11:00 am ET
Current Trend Direction: Sideways to higher, testing resistance at the 25-day Moving Average
Current Price of FNMA 4.0% Bond: $104.56, +6bp
Yesterday's gap open and move higher has left the 4% coupon well above resistance at the 200-day Moving Average. What was once a ceiling now becomes support. Niceee!
Before we get all frothy - Mortgage Bonds do have several hurdles to jump today with New Home Sales which was a non-event for bonds as reported at 10am and the $35B 5-Year Note auction results set for 1pm. In addition, Stock prices are trying to rebound from yesterday's small sell-off. Stay tuned.
The Mortgage Bankers Association (MBA) reports that its Market Composite Index, a measure of total loan application volume, declined by 8.5% in the latest week, while the refinance index fell by 11.4% and the purchase index declined by 3.5%. The survey covers over 75% of U.S. retail residential mortgage applications, according to MBA.
Recent housing data has been weak. It's because the weather has been harsh, there's a lack of developable lots and skilled workers, limited inventory, reduced investor buying, higher mortgage rates, fewer low-priced distressed sales and higher house prices. Despite these headwinds, new sales were up 16% and starts were up 18% in 2013. In 2014, expect activity to continue improving like in 2013, but new home prices will be flat.
We are encouraged by yesterdays Gap open or Rising Windowold trading strategies suggest trading in the direction of the window, which for us means higher and floating carefully for now.
Joe Shamie NMLS # 241432
First Choice Loan Services NMLS # 210764
First Choice Bank NMLS# 177877
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