A Technical Move Continues to Drive Interest Rates Higher

A Technical Move Continues to Drive Interest Rates Higher

Although news of the morning was generally friendly to mortgage bonds, prices are still falling lower in the bond market.  After hitting the 50% Fibonacci level, the improving trend we experienced came to an end. This reversal is primarily a technical one, which is an overall healthy move in the market. The improvements to mortgage interest rates were too fast to sustain, which is one reason we are now experiencing a move higher. If the 38% Fibonacci levels fail to stop the drop-in bond prices, we will likely see continued damage in the near-term direction of mortgage interest rates.

 

Stock investors are celebrating a supposed agreement that many believe will soon take place in the trade war between the United States and China. If the rumors or an agreement that both sides can live with is true, this will relieve a great deal of pressure in the minds of investors.

 

With early signs of a global slowdown in economic growth arising, many are starting to worry that the investments made during the “good times” will come back to haunt them. We all know that appreciation in the real estate market is the secret medicine that cures all housing concerns. During the good times, lenders loosen their guidelines to allow for riskier loans. It isn’t until appreciation slows that investors become worried. Once a slowdown hits, we can expect to see the less restrictive mortgage guidelines tighten. Although we are a year or two away from this occurring, it is something those of us in the real estate industry need to have on our minds.

 

Given the end of a technical rally in the bond market, we will maintain our locking bias.