Locking bias

Today is a very quiet economic news day.  The biggest story so far has been a major bounce higher in the stock market.  This follows a big down
day in the market on Friday that was spurred by a decision out of China which allowed fund managers to lend stocks for short selling.  This decision
will create more shares in the stock market, which essentially drives supply higher.  As supply increases, demand will decrease.  Therefore,
there will be downward pressure to stock prices going forward.  The initial shock of this decision created a major price drop which has essentially
been recovered already in today’s trading.  With technical factors driving the markets today, the strength of the stock market is hurting bond
prices and creating upward pressure on mortgage rates.

The 10 Year Treasury Note Yield had recently formed a nice downward channel.  However, with prices moving lower today, the yield has risen to where
it is no longer within this channel.  This is not a good

sign for mortgage rates in the near term.  We recently mentioned that we could be in for a sharp move in one direction or the other.  It is appearing
more likely that if that sharp move happens, it will not be in the direction we were hoping for. 

Despite 13 unsuccessful attempts, mortgage bonds continue to lack the strength to push up above the support that has held them back since February 2^nd. 
This seemingly formidable barrier has prevented mortgage rates from improving and has proven to be the place where mortgage borrowers should lock their
interest rates before rates deteriorate.  Bonds are currently battling this line once more.  Although possible, it is unlikely they will
be able to make a break higher in the current environment.  Once again, this means we are at the top of a trading channel and in a very volatile
position.  Therefore, we will maintain our locking bias.