20 Sep Bonds Fail to Climb
Mortgage bonds had a failed attempt to break above their 50-day moving average. As a result, mortgage interest rate pricing deteriorated by the day’s end. Bond prices are starting the day in the middle of a wide trading range, which means we could see prices whipsaw from one extreme to the other. The only hope of seeing lower mortgage interest rates rests on prices breaking above two significant ceilings. Without some form of negative economic news, that isn’t likely to occur. Without some sort of boost, I just don’t see the technical picture being strong enough to make this happen. With no scheduled economic reports due today, I’m not hopeful it will be a blockbuster day for the bond market.
As stock prices continue to climb towards all-time high levels, we may see some weakness form as they approach the ceiling that represents past highs. If slowing does occur, that would be helpful for mortgage bond pricing. In the meantime, we can expect the strength of the US stock market to provide a headwind for mortgage bonds.
Given the continued lack of strength in the bond market, we will maintain a locking bias.