17 Jul Bonds Looking to Climb
Mortgage bonds are attempting to make a break above their 25-day moving average, which could lead to mortgage interest rates taking about a 1/8% improvement if they can climb up to the next ceiling of resistance. Since there is a long range with little obstruction on the path to the ceiling, this seems to be the next logical step in the rate process. One of the catalysts of today’s bond market improvement was more pessimistic talk from President Trump about the trade war. These seesaw moves from good to bad progress have clear market impacts. If a day trader were to have access to President Trumps tweets hours before he was to release them, millions could be made. Now that’s an interesting thought….
Housing Starts for the month of June were released this morning, showing a disappointing loss of 13,000 Starts from May to June. Further, mortgage applications to purchase a home were also lower, falling -4% from the week prior. The good news for housing is that with mortgage interest rates low, housing has an opportunity to make it through the next recession without taking too big a drop from current levels. It will largely depend upon the appetite home investors have for real estate. Real estate has always been a great place to park money long term, as it has bounced out of every recession and is now at its highest price in history. Since it’s easier to purchase a home in a good market as an investment than it is to pick a winning stock, this could prove to be the saving grace.
Given signs of a break above the 25-day moving average, I suggest a floating position for those who are able to closely monitor the market.