30 Mar Great time to secure a rate
After breaking above the 25 and 50 day moving averages, mortgage bonds are now attempting to break above an important Fibonacci level. As should have been assumed, yesterday’s rally was halted when bonds reached this level. Then after a weak opening this morning, bonds made have turned around and may in fact have the strength needed to make another break higher. This would be a significant move for mortgage bonds, and could give them a free run to get back to high levels of 2016. That would help reduce the APR on mortgage interest rates just before the hot season of summer home buying. However, until bonds have made a decisive move above this point, it should be assumed that bonds will face tough resistance and could be pushed lower. At this point, it’s too early to say one way or the other what will happen in the short term.
In a speech yesterday, Fed President Janet Yellen made dovish comments regarding the current state of the US economy as well as inflation levels. This pretty much takes an April rate hike off the table for now. This was the initial fuel that propelled mortgage bonds higher.
Today’s news included ADP’s report on the job market for the month of March. In their estimate, 200,000 new jobs were created in the US. This was in-line with estimates, so the market’s reaction was tame. On Friday, we will receive the more widely considered Bureau of Labor Statistic’s report. It is estimated that 210,000 new hires will be reported. The past month showed stronger than anticipated results. Another strong report would cause a bit of panic in the bond market, and could once again stir concerns of an imminent rate hike.
With bonds battling a tough overhead resistance level, now looks like a great time to lock. Since the potential gains are limited, there appears to be more downside risk than upside potential.