Wednesday, June 7, 2017

What's going on and why does it matter?

Mortgage bonds are continuing to trade at their highest levels of the year, although their upward momentum seems to be slowing down. Financial market investors remain cautious ahead of three key events scheduled for tomorrow: (1) the European Central Bank is scheduled to make a decision on European interest rates and monetary policy; (2) there is a general election scheduled in the UK; and, (3) former FBI Director Comey is scheduled to give testimony in Washington. The Fed is scheduled to purchase $1.2 billion of GNMA mortgage bonds this morning, and they'll be back in the market tomorrow with a sizable purchase of 30-year conventional mortgages. The economic calendar is relatively quiet today, and financial markets are likely to be subdued as they await the outcome of tomorrow's events.

What should you do about it?

You may want to lock in the gains from recent trading sessions.  Otherwise, watch for mortgage bonds to continue trading above their 200-day moving average. Be prepared to lock your rate quickly if bonds fall back below that critical level.

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