Bonds Likely to Retreat

Mortgage bonds have started the day flat, but still sitting just beneath the ceiling of resistance that represents the lowest mortgage rates have been since January of 2018. The significance of this critical level shouldn’t be understated. If bonds happen to muster the strength to break above this level, we will see mortgage rates improve to levels not seen in a long time. However, since break outs are the exception and not the rule, odds of this happening are not great. Basic bond trading guidelines point to a drop either today or in the days to come. This means that mortgage interest rates right now are likely as low as we will see them in the near term, making this an exceptional opportunity to take advantage of.

Today is a short trading day, as markets will close early ahead of the Memorial Day weekend. They will also be closed on Monday. With limited economic data on the books for today, we will see markets trade based on the technical picture. After the stock market has taken heavy beatings the past few days, I wouldn’t be surprised to see President Trump release a Tweet that helps encourage stock investors to confidently step back into the game. With the power President Trump has to move the markets, it sure would be great to have advance notice of his Tweets on the subject. In today’s world, we are always just one Tweet away from a market moving event.

Given the current status of the bond market, and my belief that we will soon see stocks move higher, I will maintain a locking bias.