Wednesday, May 27, 2015 - Article by: Bart Castelli - Homestar Financial Corporation NMLS #70864 -
Another good day for the bond and mortgage markets, but not as good as yesterday as the 10yr note still was not able to break out of its three week range. MBSs tagged along with prices a little better than this morning. Of course the stock indexes improved, a usual move after the prior day saw indexes decline. No trend in stocks now, all chop and no clear sustained gains for months. Today rumors were circulating that Greece had made a deal with creditors was quickly dispelled but it got the momentum moving. I noted this morning that Greece has a payment due June 5th, hard to square a rumor like that ahead of a key payment that is still questionable by most, although Greek officials saying today they will have the payment to the IMF. One dinky dot on the map causing so much tension and angst.
Treasury sold $35B of 5yr notes this afternoon as the auction was a little lite on demand. Tomorrow weekly claims are expected a little lower with claims holding steady as they have been for three weeks. The only other data is NAR's April pending home sales expected up after March increase. Also tomorrow Treasury sell $29B of 7yr notes at noon.
MBS price were up 9BPS but I cannot suggest to anyone to float and I will not do such for those closing in less than 30 days. Technicals will not let us and with Q1 GDP on Friday morning that may elicit volatility as I think it is prudent to keep my lock recommendation status quo.
In summary, 2.14% has not been the charm - yet. A Greek official said a deal was close at hand, but later a German official denied a deal was close. It is amazing how unconfirmed headlines can move the markets which always makes floating risky as you cannot plan for them. Tomorrow we have our final auction of the week and it is end of month, both of which are supportive of bonds. If you feel lucky and you can afford to be wrong, you are risky a safe bet by floating in this environment.
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