An Important Week for Mortgage Bonds

Mortgage bonds failed to close the gap created from Friday’s sharp downside opening.  Since gaps generally like to be closed, this could be a force to help bonds improve throughout today.  However, much of this will likely have a great deal to do with the performance of the U.S. stock market, which has yet to show signs of slowing.

This week has a limited number of economic reports. However, the ones that we have happen to be of high impact, with both Durable Goods and the first release of 3rd Quarter GDP being released later in the week.  It seems likely that bonds will remain in a tight trading range until GDP is released or positive news regarding the people’s tax bill is released.

Healthcare Reform is also an ongoing battle, with Republicans working in the background to come up with a proposal that will gain enough votes to repeal Obamacare.  With healthcare and disease control consuming 20% of our entire GDP, the outcome has a significant impact to our overall economy.

With bonds still on a downward trading channel, the rule is to maintain a locking bias.