MMG Update - Tuesday, October 2, 2007 10:36am ET
Current Trend Direction: Sideways
Risks favor: Floating
Current Price of FNMA 6.0% Bond: $100.16, -6bp
Yesterday, Mortgage Bonds bounced off of support at the 200-day Moving Average and while prices did finish the day higher, the advance was stopped at the 25-day MA resistance level. This morning, Mortgage Bonds are trading slightly lower and are now directly between these moving averages.
Stocks are trying to find some direction today after the Dow closed at an all-time high yesterday and above the 14,000 level. Should Stocks continue to move higher, it may be at the expense of Bonds, but it is not likely Bond prices will fall below the 200-day Moving Average in advance of Friday's important Jobs Report.
Housing news - the Pending Home Sales Index for August reported a -6.5% drop in sales, which was lower than expectations of a -2.0% drop in sales, but not nearly as bad as July’s dismal showing of a -10.7%. The Pending Home Sales Index is reported by the National Association of Realtors as a leading indicator of existing home sales. Mortgage Bonds ticked slightly higher on the weak news.
Dallas Federal Reserve President Richard “Loose Lips” Fisher is scheduled to speak in Dallas , Texas at 1:35pm ET. A Q&A session is expected to follow the speech so bond traders will be listening closely as Mr. Fisher has been known to rifle off remarks that could impact the market.
Mortgage Bonds continue to trade above the 200-day Moving Average and we will continue to float as long as prices remain above this floor.