Bonds struggling so far this morning

Bonds struggling so far this morning

Stocks are higher and mortgage bonds are lower to start the day.  The stock market appears to have founds its footing the past couple days, and may be able to push back above the 25 day moving average, where they could then potentially move back into all-time high range.  If that happens, that will of course create headwind in the bond market, making higher rates more likely.

 

Loan application data was released this morning, showing that purchase applications surged another 3% last week.  This move higher is anticipated to continue as we head into the warm weather of summer.  Although improving, it is important to note that purchases are still down 14% from this same time last year.

 

At 11:00 a.m. MST, we will get the results from today’s 10 Year Treasury Note auction.  Then at noon, the Fed Meeting Minutes will be released.  As we mentioned yesterday, recent history shows that Fed Minute releases have not been kind to the bond market.  I anticipate that the report will show that some Fed members would like to see the Fed taper more rapidly, as they anticipate economic conditions to be strong going forward.  Of course, this could panic investors and cause a selloff inmortgage bonds.

 

With bonds struggling so far today, and with the risk of today’s reports, we will suggest a locking bias.  The charts show that bonds could be poised to continue their move lower.  With the 200 day moving average not far beneath present levels, let’s hope we stay above this important floor of support.