Current Price of FNMA 6.0% Bond: $98.81, -19bp
"If you don't know where you're going, chances are you will end up somewhere else" - Yogi Berra. And Mortgage Bonds look like they don't know which direction to go so far this morning. After a healthy Bond rally which started last Wednesday, Traders appear to be taking some profits, pushing prices lower this morning.
And with no scheduled economic news to help provide market direction, pricing will be driven by technical factors. One look at the Bond Page shows some formidable ceilings of resistance, which will make it more difficult for this rally to continue. Notice the Falling Resistance Trendline, which is why the trend direction remains lower, even after the recent rally. Additionally, the 25-day Moving Average, as well as the Falling Window discussed yesterday, are both very tough barriers.
With pricing improving 125bp in the past week, we don't want to give up any of those gains, but at the same time we want to wait and see if the Bond can reverse higher today - just like it has three of the past six days. For the moment, we are advising Floating because most of this morning's losses occurred before rate sheets came out, and so far has only resulted in a partial giveback of yesterday's rally.
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