A trend reversal?

In what is beginning to look like a trend reversal, mortgage bonds remain below their 200-day moving average.  Further, the 10 Year Treasury Note yield is also below its 200 DMA. How low will rates go?  Well, they could head back down to near pre-election levels. As soon as the stock market wakes up and realizes that the catalyst for stocks moving higher may no longer be relevant given the political climate. If stocks do become coherent, mortgage bonds will benefit greatly. This could provide mortgage bonds the fuel they need to make another significant run higher, bringing interest rates down in the process.

Economists who confidently confirmed the end of sub-4% interest rates are now eating crow, as most every lender is now off offering 30 year fixed rates below this critical number.  With City Creek being amongst the lowest offered in the market, we are now 3.625% (3.78% APR), which was not expected by most to be seen in 2017.  This is only .25% higher than we were prior to last November’s election. However, the stock market is still significantly higher than pre-election levels.  This gap could signal a significant fall in the works for stocks. We will have to wait and see how this plays out.

With mortgage bonds now in their 3rd day being above their 200 DMA, we can suggest floating as long as you are able to closely watch the markets. However, realize that we are still at risk of a pull back. Therefore, be very careful.