29 May Bonds Run Into Resistance 5-25-18
Mortgage bonds remain positive today, sitting just beneath their 100 day moving average. This has proven to be a strong ceiling of resistance and has held bonds below this level since last fall. Based on historical data, the likelihood of making a break above the 100 DMA remains low. Therefore, it isn’t something we should plan on. On the other hand, if bonds are able to overcome this barrier, it would be a strong sign for the near term direction of mortgage rates. Let’s hope for that to happen.
The bond market will be closing today at noon Mountain time and will remain closed until Tuesday. On shortened trading days, we generally experience increased volatility in the market. With today’s Durable Good Orders report showing mixed results, there wasn’t much to base today’s trading off of. So we remain in a heavily technical based market with the current trend in our favor.
Next week will be an important one for the bond market as the economic calendar heats up. In addition to receiving news on consumer inflation, we will also get reports on the health of the labor market in the month of May. Given the seasonal summer job hires, the report could beat expectations. The market is currently anticipating about 200,000 new hires and for the Unemployment Rate to remain steady at the 3.9% level. Since this is the lowest level in 18 years, that is a super low target.
Although there is not a reason to immediately rush to lock, you may want to consider locking before the market opens on Tuesday. Remember, we had the ability to lock until late Monday night at today’s closing rate.