Tuesday, July 18, 2017, with update

End of Trading Day update

Mortgage and government bond trading was heavy today. MBS prices finished +22 bps higher as bond yields fell across the board and curves flattened. Investors were reacting to news that any hope of passing the healthcare bill in the Senate evaporated with the announcement of two oppositional GOP senators and the subsequent headlines that three GOP senators were already outspoken against any repeal effort of the current law. Not since the economic crisis have markets been so driven by headline risk out of Washington.

If fundamentals still matter, tomorrow will tell. We will get the big data news of the week with Housing Starts and Building Permits.

What's going on and why does it matter?

Mortgage bonds opened higher today but it seems like they're meeting some stiff technical resistance at their 200-day moving average. Unless bonds can break above that level, bond prices may continue to drift sideways in a trading range between their 100-day and 200-day moving averages. News coming out of Washington doesn't bode well for President Trump's fiscal agenda, and it doesn't seem like there are enough votes to get the healthcare bill passed. This may dampen the mood for stocks, and mortgage bonds may benefit.  The economic calendar is light this week, and there is nothing significant on the calendar today. The Fed's mortgage bond buying activity today is limited to $500 million of 15-year conventional mortgages, but they'll be back in the market tomorrow with a sizable purchase of 30-year conventional mortgages.

What should you do about it?

Watch for mortgage bonds to bounce around between their 100-day and 200-day moving averages.  Be prepared to lock your rate quickly if the market changes directions.

MBS Chart
Economic reports that may impact mortgage rates this week:

17 Jul
NY Fed
Mfg. Index
19 Jul
19 Jul
20 Jul
Initial Jobless
Week of
July 10

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