Bonds Heading Towards the Ceiling

Mortgage bonds are off to a great start in early morning trading, as the technical bounce higher continues.  Since hitting the bottom of the trading channel, we can expect to see bonds move towards the top of the trading range.  Although we had a floating stance yesterday, as we approach the top of the range we will need to be mindful that the next move will likely be lower.  Since the top is not too far off from current levels, now is the time to be careful.  Further, there is a bond coupon rollover scheduled for later today, although this won’t technically impact mortgage interest rate pricing, it will weaken the technical outlook.

There were mixed reports today regarding the Coronavirus.  On one hand, the world reported yesterday the highest single day cases of the virus on record.  Given that we are now seeing most states open back up, the concern of a second wave is legitimate.  On the other hand, we learned that asymptomatic people are not likely to pass the virus to other humans.  With this news, it seems that as long as people experiencing symptoms remain secluded from others, we could see the rate of cases slow.

With the Chairman of the Federal Reserve set to speak tomorrow, we could see increased volatility.  We are going to hold a locking bias.