What's going on and why does it matter?
Mortgage bonds seem to be holding up pretty well as the week opens, in spite of last Friday's jobs report, which came out stronger than market expectations. This is another big week for the markets with many high-tiered economic releases scheduled throughout the week. The highlight of the week will be the Fed's monetary policy statement which is scheduled for Wednesday afternoon. Although the market expects the Fed to increase short-term interest rates, all eyes will be on the accompanying statement and "dot plot" whereby various Fed policymakers indicate their individual estimates for the future direction of interest rates. The market will also be watching closely as Congress continues to negotiate various aspects of the tax reform bill. The Fed is scheduled to purchase up to $1.405 billion of GNMA mortgage bonds today, which may help.
What should you do about it?
Watch for mortgage bonds to bounce higher off their 200-day moving average, but be prepared to lock your rate quickly if bond prices break below that level.