Locking bias

Mortgage bonds remain within their new sideways trading range, trapped between overhead resistance provided by the 25 and 50 day moving averages as the ceiling and the 100 DMA providing a floor of support.  Both levels are strong, bringing new stability to mortgage bonds.  Although not with pricing as attractive as the range of a couple weeks ago. Mortgage rates remain relatively close to all-time lows.  The recent move higher has stimulated a high level of mortgage applications as people look to lock in ahead of the rhetoric and fear of an imminent Fed rate hike. 

The Federal Reserve is currently hashing out their plan for short term interest rates.  Their two-day meeting began this morning and will wrap up tomorrow afternoon.  We will receive their interest rate decision immediately following their meeting.  We don’t anticipate a rate hike to be announced at this time.  However, chances of a December rate hike seem to be increasing.  We expect the Fed to set up the markets to prepare for this to happen.  It’s possible that mortgage bonds will improve after the announcement.  However, there is no way to say for sure. 

As long as we remain beneath the 25 and 50 day moving averages, there is little benefit to float.  Therefore, we will maintain our locking bias.