Bonds Break Out

Mortgage bond prices have finally broken out of the tight trading channel. Unfortunately, the break out was to the downside, which is bad news for mortgage interest rates. Now that the floor of support has broken, there is significant room to the downside for bonds to fall. There are only a couple levels that may hold before bond prices fall back down to multi year lows. If that happens, we will certainly see mortgage interest rates take a step higher.

The 10 Year Treasury Note yield has broken above three significant ceilings in the past two trading days. Once again, this is not good news for mortgage interest rates.

News of the week will be heavily based on housing data. However, on Friday we will get an updated report on the strength of the US economy via the GDP report. Given that GDP is one of the most significant influences of mortgage interest rates, bond holders will be closely watching the report.

With little hope of bonds making significant improvements, we will maintain our locking bias.