Bond Making a Breakout?

Bond Making a Breakout?

The 10-Year Treasury Note yield fell down beneath a very important floor of support, crossing the Fibonacci level at 1.77% yield.  The 10-Year has had a lot of negative press from large institutional traders who believed that prices have already grown to near highs of 2020, making the 10-Year not an attractive investments.  Since the 10-Year tends to influence mortgage bonds, it’s an encouraging sign for the near term direction of mortgage interest rate, so we’ll certainly celebrate the move.  The key will be to wait and see if prices close the day with yields beneath this 1.77% level.  If they do, it could establish a new range for the 10-Year yield.

 

The stock market is falling today over concerns of the coronavirus spreading.  The stock market has been due for a pull-back, so it seems to me that investors have been looking for a reason to take some profits off the table.  Given the history of stocks, this pull back will be short lived and we will soon see stock prices climb higher.  When that happens, we can expect to see upward pressure on mortgage interest rates.  So now seems to be a great time to secure a rate.

 

With mortgage bonds above the ceiling that held rates back from improving, there is no need to immediately rush to lock.  However, I suspect that we will see upward pressure on rates soon.  If you choose to float, do so only if you are able to closely monitor the markets.  If bonds break back beneath the current floor, lock quickly.