Brutal bond market

Brutal bond market

The stock market is within a whisker of all time high levels once again this morning.  This is adding pressure to the bond market and pressuring mortgage
interest rates higher.  The past two weeks have been brutal for mortgage bonds, pushing mortgage rates up nearly .25% in a very short time. 
Although since today is a slow economic report news day, mortgage bonds and the stock market will both trade heavily based on the technical picture. 
We are now in a clear downward trend which makes the technical picture very ugly. 

 

This week is Jobs Week, which means that we will receive job growth data from both ADP as well as the Bureau of Labor Statistics (BLS).  If you remember,
last month’s report was terrible but yet the bond market still lost ground.  This increases the risk of the reports causing mortgage bonds to
deteriorate even more, regardless of the results.  It seems that the market has determined that mortgage rates are lower than they should be. 
Therefore, investors have been selling bonds even in light of continued weak economic data.  This makes forecasting a point at which the bleeding
will stop very difficult to do. 

 

With bonds continuing their downward cycle, we will maintain a locking bias.  It seems like bonds are destined to test their 200 day moving average. 
If this happens, that would be another 65 basis point drop and would push bonds beneath a longer term upward channel that has been in place since December
of 2013.  That would be a VERY negative sign and could change the future direction of mortgage rates.