11 May Locking bias
Mortgage bonds continue to struggle this morning, even in the face of a falling US stock market. The negative sentiment has pushed bond prices below their 50 and 100 day moving averages, which has held rates from moving higher over the past six weeks. Now that we are beneath this critical level of support, we can expect to fall to the next floor of support. Further, the levels that once served as floors will now be ceilings of resistance that will make it more difficult for interest rates to improve from current levels. Overall, there is an abundance of negativity in the bond market which can quickly lead to continued moves higher in mortgage interest rates.
News of the firing of FBI Chief James Comey is now showing signs of wear on the hopes of US investors. Political pressure on both sides is heating up, creating an even broader divide among those who support President Trump and those who don’t. The acting head of the FBI, Andrew McCabe, contradicted the White House assertions that the agency’s rank-and-file had lost confidence in Comey. In response to a question at a Senate Intelligence Committee hearing this morning, McCabe stated, “I can tell you Director Comey enjoyed broad support in the FBI and still does to this day.” This statement is adding fuel to an already heated subject. Since this issue could bring about more problems for the Administration, it could continue to wear on the stock market over time.
With bonds now beneath support, we will maintain our locking bias.