17 May Bond Prices Keep Stall
After topping out at a nearly 18-month high in bond prices, bond investors have become skittish. Although prices have not yet made any dramatic drop, the writing seems to be clearly on the wall as to what the current sentiment is. As bond prices try to gain a better understanding of where to head from here, we need to realize that passing up on the current opportunity to lock could be costly. Since break outs are the exception and not the rule, we are more likely to see pricing deteriorate from current levels. That would add upward pressure to mortgage interest rate pricing. Unless there is economic news that scares the market, that will be the path of least resistance.
With today being a slow day for scheduled economic news, markets will trade heavily based upon the technical outlook. Next week the economic news report calendar heats up, which will include an update on the status of the housing market. The Existing Home Sales report will provide a critical look into the strength of the housing market. Since the last report was measuring from March, I anticipate that we will see a strong increase in the numbers for April. In addition, as we move into the summer purchase market, I expect this report will continue to improve over time.
Given the continued lack of strength in the bond market, we will maintain a locking bias.