Two Good Reasons To Play It Safe With Lender Pricing Right Now

By: Matthew Graham •

Actually, there may be more than two good reasons to play it safe with your lock/float approach at the moment.  And as always, there are counterpoints that suggest a roll of the dice.  But what there are certainly too good charts to support the former assertion, and for anyone who has, in the past, ascribed to any iteration of "play the range until the range plays you," the charts will show that we've gone about as far as we can go in the context of recent MBS and TSY movement. 

But first, by way of prefacing the longer term charts and also giving you a snapshot of various MBS/Treasury trading levels here at the end of the day, here's a quick clip from the MBS Live Dashboard:

and now for the longer term charts...

First, take a look at the same old 10yr yield chart...  Keep in mind that 10yr yields are currently lower than those pictured in the chart below.  That's because I have this chart set for a 3pm marking period at the official close.  The stuff between 3pm and 5pm is of little consequence and tracking it on long term technical charts yields less consistent results than the 3pm end time:

As you can see...  right on the bleeding edge of the sideways trend channel.  And it's a similar story in MBS, although a bit less certain due to the fact that one COULD consider the range to be sideways based on November's highs, but if you're leaning that way, we'd still need to break the trendline pictured below before considering a test at those higher levels:

There's a ton of data tomorrow:

  • 7am MBA Applications
  • 830am Durable Goods - new orders are expected to have fallen from -0.6% previously to -1.0%.  Last month's strong +1.8% that excluded transportation is seen falling to 0.0% this month, while the numbers exclusing defense and aircraft are seen falling from +2.9% last month to -0.6%
  • 830am Personal Income/Outlays - Income seen rising to 0.3% from 0.1% last month.  Consumption (outlays) seen falling to 0.4% from 0.6% last month.  PCE price index seen rising 0.1% month-over-month
  • 830am Jobless Claims - After last week's 388k, Jobless Claims are expected to have risen slightly to 390k with continued claims at 3.605 mln vs 3.608 mln.
  • 955am Consumer Sentiment (Final) - Seen roughly unchanged at 64.5 versus last month's 64.2. 
  • 1pm 7yr Treasury Note Auction

And don't forget it's basically the last day of the week as Friday will be a shorty, and participation will be quite low.  Bottom line, there's a chance that we're running into range resistance and long weekends lie ahead... It's just feeling like time to start lockin' 'em up an moving on, especially if you're getting the reprices for which you're waiting this afternoon.