17 Feb Locking bias
After breaking beneath support, both mortgage bonds and the 10 Year Treasury Note have taken a sharp move lower. The moves of the past few days have ratcheted mortgage rates 1/8% higher and are now close to taking another 1/8% step higher. It is often said that mortgage rates improve slowly and move higher quickly. The current play in the market seems to support this statement. The next level of support for mortgage bonds is only 16 basis points beneath current levels. Cross your fingers that this support actually holds. With the 10 YTN yield plowing higher, we need something to help us stop the bleeding with mortgage rates.
Although there was a supposed cease fire announced between Russia and the Ukraine, there seems to be little truth behind the words. Although there has been little said about the conflict the past couple months, the fighting has continued but has done little to scare off investors. Typically, geopolitical military concerns cause stock investors to pause and consider the risks associated with war. However, in this case, investors were able to quickly move beyond their initial concerns and are now becoming numb to the topic.
Although financial news reports released today have been bond friendly, mortgage bonds continue to struggle. We will likely test the next floor of support in the next couple of days. So again, things will likely get worse before they get better. We will maintain our locking bias as we look to the next floor as providing hope of stability and a place where mortgage bonds can find their short term bottom.