17 Jun Locking bias
Mortgage bonds finally fell from the top of the channel that we have been referring to in the most recent market updates. This is following the trend of the past few years where bonds fall each time they hit this lofty level. The 10 Year Treasury Note Yield has followed a similar path, with yields moving more than 10 basis points higher than the lows of yesterday. This is pressuring the APR on mortgage loans slightly higher. There is a great deal of room for yields to rise on the 10 Year before hitting the next ceiling of resistance. It would be expected to experience at least another 10 basis point increase before the 10 Year finds stability. However, we will have to wait and see what happens.
Oil prices are looking to stabilize after experiencing more than a 10% downward move within the past couple of weeks. Lower commodity prices were primarily a result of a stronger US dollar. However, now that the vote in Great Brittan to leave the EO (Brexit) is appearing less likely, the markets are finding their footing once more. Since a “Brexit” would likely be beneficial to US bond holders as foreign investors look for a safe place to park their money, fewer investors are buying bonds today as a result of the news. With all of this still in play, there is still hope of lower bond market yields in the future.
Given the weakness developing in the bond market, we will maintain our locking bias.