Not much activity to report about the mortgage bond market, as prices remain trapped in a tight trading range. Although this trading range has helped provide stability with mortgage interest rates, it has also built up a lot of uncertainty in knowing the next direction we can expect to see mortgage interest rates take. If bond prices can break above the ceiling, we can expect to see rates come down. However, if the final break is through the floor, we will see upward pressure on mortgage interest rates.
The direction of interest rates will be heavily influenced based on what happens to stock prices in the near term. After hitting new all-time high levels earlier this week, stocks have fallen a bit and remain beneath this critical level. If stocks can make a decisive break higher, we will see upward pressure on mortgage interest rates. Of course, the opposite is also true.
With bonds remaining beneath a strong ceiling of resistance, we will maintain a locking bias.