The 200 Day Moving Average Continues to Weaken

The 200-day moving average is currently acting like a wet piece of paper, with bond prices slicing above and below this critical level without much resistance.  Oddly enough, the 25 DMA has shown more backbone in the most recent weeks.  However, this support level is also currently at risk of a breach. 

With very little scheduled economic reports today, bonds will trade heavily based on the technical outlook.  From a technical perspective, the only positive sign in the bond market is that the 10 Year Treasury Note yield is still below its 200 DMA.  If this yield moves higher and breaks above this critical level, we could see mortgage bond prices move lower and interest rates pressured higher. 

Stocks are once again on a tear this morning, as they look to have another record setting day.  The continued strength in stocks is both shocking and impressive, as stock investors continue to see economic growth in their outlook.  It is not a matter of if, but just a concern as to when, stocks will take a breather.  It could take a bit of a pull back for mortgage bonds to see another possible move higher. 

With bonds back to showing weakness, there is little incentive to float.  As a result, we will suggest a locking bias.