04 Jun Bond Market Correction?
In yesterday’s market update I mentioned that we are on the verge of a short-term correction in the bond market. I can make these predictions based on the technical picture of the bond market. Since yesterday’s technical signal pointed towards a pull-back, I was able to confidently state a pullback was coming. This morning bond prices did in fact pull back, which added slight upward pressure to mortgage interest rates. How far will this pull-back take us? I predict we will lose at least 38.2% of the gains that we have made in recent weeks. This means we will likely see things get worse before they get better, at least in the short term. I still see lower rates in the months to come.
Fed Chairman, Jerome Powell, said this morning that the Fed is closely watching the state of the U.S. economy, and will be willing to make changes as needed. It seems that the Fed has finally acknowledged that the next move in the Fed Funds rate will be to move rates lower. As the trade war now includes Mexico as a target, we will likely see market volatility continue to remain high. Some days will bring good news, like today, and others will bring bad. When good news is released, the stock market will climb, and mortgage interest rates will be pressured higher.
Given that bonds are now pulling back, we will switch to a short-term locking position. If you need to close soon, now is a great time to secure a rate.