Current Price of FNMA 6.0% Bond: $98.78, +16bp
Mortgage Bonds are trading nicely higher this morning, following up on Friday's successful bounce on the $98.28 floor of support.
While last week was all about technicals - this week the economic news will return to center stage for driving market action, kicking off with a look at the housing sector this morning. Existing Home Sales during May of 5.99 Million units were slightly stronger than the 5.90 Million that economists had expected - but the inventory of homes on the market rose by 5%, currently representing an 8.9 month supply. Lawrence Yun, economist for NAR said that although housing is still correcting, he said the fundamentals such as strong job creations, economic growth, favorable mortgage rates and flat home prices are all positives for the outlook ahead.
And the calendar will get even more intense from here, with potentially market moving releases every day this week, including the Fed Policy Statement on Thursday and the Fed's favored measure of inflation, the Core Personal Consumption Expenditure (PCE) number, arriving the very next day on Friday.
For now, Bond prices are moving higher, but fast approaching a tough layer of overhead resistance at the Falling Resistance Line and Falling Window. We will continue to carefully float for now, but with the week's strong calendar of economic news in store, the volatile ride Bonds have been on lately may not be over just yet.
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